UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
Current Report
 
Pursuant To Section 13 or 15 (d) of the
Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported) – April 29, 2003
 
ACE LIMITED
(Exact name of registrant as specified in its charter)
 
Cayman Islands
(State or other jurisdiction)	 	1-11778
(Commission File Number)	 	98-0091805
(I.R.S. Employer of Incorporation
Identification No.)	
ACE Global Headquarters
17 Woodbourne Avenue
Hamilton HM 08 Bermuda
(Address of principal executive offices)
 
Registrant’s telephone number, including area code: (441) 295-5200
 
Not applicable
(Former name or former address, if changed since last report)

 
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
 
(c) Exhibits
 
Exhibit
Number
	  	Description

99.1	  	Press release, dated April 29, 2003, reporting first quarter results	
		
99.2	  	Financial Supplement	
 
Item 9. Regulation FD Disclosure
 
See Item 12. Results of  Operations and Financial Condition.
 
Item 12. Results of Operations and Financial Condition
 
On April 29, 2003, ACE Limited issued a press release reporting its first quarter 2003 results and the availability of its first quarter financial supplement. The press release and the financial supplement are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and are hereby incorporated herein by reference.
 
In accordance with general instructions B.2 and B.6 of Form 8-K, the information in this report, including exhibits, is furnished pursuant to Items 9 and 12 and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section.

 
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 L IMITED	
		
By:	 	/ S /    P HILIP V. B ANCROFT        
	
 	 	Philip V. Bancroft
Chief Financial Officer	
 
DATE: April 29, 2003

EXHIBIT INDEX
 
Number
	  	Description
	  	Method of Filing

99.1	  	Press release, dated April 29, 2003, reporting first quarter results	  	Furnished herewith	
		
99.2	  	Financial Supplement	  	Furnished herewith	

ACE Limited	  	PO Box HM 1015	  	 	
ACE Global Headquarters	  	Hamilton HM DX	  	 	
17 Woodbourne Avenue	  	Bermuda	  	 	
Hamilton HM 08	  	 	  	 	
Bermuda	  	441 295-5200 main	  	 	
 	  	441 292-8675 fax	  	 	
		
 	  	www.acelimited.com	  	 	
 
NEWS RELEASE
 
FOR IMMEDIATE RELEASE
 
Investor Contact:	    	Helen M. Wilson	
 	    	(441) 299-9283	
		
Media Contact:	    	Lilla Zuill	
 	    	(441) 278-6616	
 
ACE LIMITED REPORTS FIRST QUARTER RESULTS
 
HAMILTON, Bermuda – April 29, 2003 – ACE Limited (NYSE: ACE) today reported the results of operations for the quarter ended March 31, 2003. Highlights for the quarter are as follows:
 
 	•	 	Net income (including realized losses) for the quarter totaled $247 million compared with net income of $198 million for the comparable period a year ago.	
 
 	•	 	Net income per share was $0.90 for the period compared with $0.70 for the same quarter last year, a gain of 29%.	
 
 	•	 	Net operating income was $279 million compared with $216 million for the same quarter in 2002. ( 1) 	
 
 	•	 	Net operating income per share was $1.02 for the current quarter compared with $0.77 for the same quarter last year, a gain of 32%. ( 1 ) 	
 
 	•	 	Net realized losses, net of tax, were $32 million, compared with net realized losses of $18 million for the same quarter in 2002. Unrealized gains totaled $79 million compared with $84 million for the same period in 2002.	
 
 	•	 	Diluted book value per share at March 31, 2003 was $25.14 compared with $24.16 at December 31, 2002, and $23.78 at March 31, 2002. ( 2 ) 	
 
 	•	 	Net premiums written increased 48 percent over the same quarter a year ago, while net premiums earned increased 52% quarter on quarter.	
 
 	•	 	Operating cash flow was $600 million during the quarter compared to $144 million in the comparable quarter of 2002.	
 
 	•	 	Net investment income rose 3% to $206 million for the quarter compared with $200 million in the prior year’s quarter.	
 
 	•	 	The combined ratio was 90.6% for the quarter compared to 93.1% for the first quarter 2002.	

1

Brian Duperreault, Chairman and Chief Executive Officer of ACE Limited, commented: “This was a good quarter for us by any standard of measurement. We were able to demonstrate the earning power we have been building over the last three years. We benefited from growth in earned premiums, improved underwriting margins and strong positive cash flow. However, low investment yields limited our growth in investment income to 3%, which continues to lag the growth in underwriting income. Our annualized ROE from operations was 16.7%. ( 3 ) In summary, an excellent start for the current fiscal year.”
 
Please refer to the ACE Financial Supplement, which is posted on the Company’s website, for more detailed information on individual segment performance, together with additional disclosure on reinsurance recoverable, loss reserves, financial guaranty portfolio, investment portfolio and capital structure. ACE’s website reference (url) is http://media.corporate-ir.net/media_files/nys/ace/reports/fin_supp_march_31_2003.xls.
 
ACE Limited (NYSE: ACE) will host a live webcast of its first quarter earnings conference call on Wednesday, April 30, 2003, beginning at 8:30 a.m. EST. The public may access both the webcast, available on a listen-only basis, and the financial supplement at www.acelimited.com. Please refer to our website under “Investor Information, Calendar of Events”, one half hour before, for further webcast details. Individuals who access the webcast will be asked to identify themselves and their affiliation. A replay of the webcast will be available following the live webcast on Wednesday, April 30, 2003 until Wednesday, May 14, 2003 at 5:00 p.m. EDT.
 
The ACE Group of Companies provides insurance and reinsurance for a diverse group of clients. The ACE Group conducts its business on a global basis with operating subsidiaries in nearly 50 countries. Additional information can be found at: www.acelimited.com.

1 	 	Net operating income (loss) is a common performance measurement and is defined as net income (loss) excluding net realized gains (losses) on investments and the tax effect of net realized gains (losses) on investments. We believe this presentation of net operating income (loss) enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business. We exclude net realized gains (losses) on investments from net operating income (loss) because the amount of these gains (losses) is heavily influenced by, and fluctuates in part, according to the availability of market opportunities. Net operating income (loss) should not be viewed as a substitute for net income determined in accordance with generally accepted accounting principles (GAAP).	
 
2 	 	Annualized operating return on equity is calculated using net operating income (loss) less mezzanine equity dividend divided by average shareholders’ equity for the period.	
 
3 	 	Diluted book value per share is shareholder’s equity and net proceeds from assumed conversions of outstanding in-the-money options divided by the sum of shares outstanding and the number of options assumed issued.	

2

Application of the Safe Harbor of the Private Securities Litigation Reform Act of 1995:
 
Any forward-looking statements made in this press release reflect the Company’s current views with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties which may cause actual results to differ materially from those set forth in these statements. For example, the Company’s forward-looking statements could be affected by competition, pricing and policy term trends, the levels of new and renewal business achieved, market acceptance, changes in demand, the frequency of unpredictable catastrophic events, actual loss experience, uncertainties in the reserving or settlement process, the impact of aggregate policy coverage limits, the impact of bankruptcies of various asbestos producers and related business, new theories of liability, judicial and legislative developments, litigation tactics, the amount and timing of reinsurance recoverable, actual market developments, rating agency action, possible terrorism or the outbreak and effects of war and economic, political, regulatory, insurance and reinsurance business conditions, as well as management’s response to these factors, and other factors identified in the Company’s filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
 
(tables to follow)
 
3

 
ACE Limited
Summary Consolidated Balance Sheets
(in millions of U.S. dollars)	
 	  	March 31 2003
	  	December 31 2002
	
 	  	(Unaudited)	  	 	
Assets	  	 	 	  	 	 	
Total investments and cash	  	$	19,218	  	$	18,324	
Reinsurance recoverable	  	 	14,132	  	 	13,991	
Insurance and reinsurance balances receivable	  	 	3,228	  	 	2,654	
Other assets	  	 	8,879	  	 	8,482	
 	  			  			
Total assets	  	$	45,456	  	$	43,451	
 	  			  			
Liabilities	  	 	 	  	 	 	
Unpaid losses and loss expenses	  	$	24,636	  	$	24,315	
Unearned premiums	  	 	6,573	  	 	5,586	
Other liabilities	  	 	7,235	  	 	6,850	
 	  			  			
Total liabilities	  	$	38,443	  	$	36,751	
 	  			  			
Commitments and contingencies	  	 	 	  	 	 	
Mezzanine equity	  	$	311	  	$	311	
 	  			  			
Shareholders’ equity	  	 	 	  	 	 	
Total shareholders’ equity	  	$	6,702	  	$	6,389	
 	  			  			
Total liabilities, mezzanine equity and shareholders’ equity	  	$	45,456	  	$	43,451	
 	  			  			
Diluted book value per share	  	$	25.14	  	$	24.16	
 
4

 
ACE Limited
Summary Consolidated Financial Data
(in millions of U.S. dollars, except share, per share data, and ratios)
(Unaudited)
 	 	
 	  	Three Months Ended
March 31
	 		
 	  	2003
	 	  	2002
	 		
Gross premiums written	  	$	4,113	 	  	$	3,118	 		
Net premiums written	  	 	2,930	 	  	 	1,986	 		
Net premiums earned	  	 	2,072	 	  	 	1,360	 		
Losses and loss expenses	  	 	1,283	 	  	 	853	 		
Life and annuity benefits	  	 	48	 	  	 	23	 		
Policy acquisition costs	  	 	296	 	  	 	198	 		
Administrative expenses	  	 	260	 	  	 	197	 		
 	  				  					
Underwriting income	  	 	185	 	  	 	89	 		
Net investment income	  	 	206	 	  	 	200	 		
Other income (expense)	  	 	(6	)	  	 	5	 		
Interest expense	  	 	45	 	  	 	46	 		
Income tax expense	  	 	61	 	  	 	32	 		
 	  				  					
Net operating income*	  	$	279	 	  	$	216	 		
Net realized losses	  	 	(40	)	  	 	(26	)		
Tax effect of net realized losses	  	 	8	 	  	 	8	 		
 	  				  					
Net income	  	$	247	 	  	$	198	 		
 	  				  					
Diluted earnings per share:	  	 	 	 	  	 	 	 		
Net operating income	  	 	$1.02	 	  	 	$0.77	 		
Net income	  	 	$0.90	 	  	 	$0.70	 		
Weighted average diluted shares outstanding	  	 	268,040,665	 	  	 	271,527,253	 		
Loss and loss expense ratio	  	 	63.4%	 	  	 	64.1%	 		
Policy acquisition cost ratio	  	 	14.4%	 	  	 	14.3%	 		
Administrative expense ratio	  	 	12.8%	 	  	 	14.7%	 		
Combined ratio	  	 	90.6%	 	  	 	93.1%	 		

*	 	Net operating income comprises income excluding net realized gains (losses) net of tax.	
 
 	 	Ratios exclude life reinsurance business	
 
5

ACE Limited
Consolidated Supplemental Segment Information
(in millions of U.S. dollars)
(Unaudited)
 	  	Three Months Ended
March 31
	 	
 	  	2003
	 	  	2002
	 	
Gross Premiums Written	  	 	 	 	  	 	 	 	
Insurance—North American	  	$	1,664	 	  	$	1,265	 	
Insurance—Overseas General	  	 	1,406	 	  	 	962	 	
Global Reinsurance*	  	 	511	 	  	 	403	 	
Financial Services	  	 	532	 	  	 	488	 	
 	  				  				
Total	  	$	4,113	 	  	$	3,118	 	
 	  				  				
Net Premiums Written	  	 	 	 	  	 	 	 	
Insurance—North American	  	$	933	 	  	$	513	 	
Insurance—Overseas General	  	 	981	 	  	 	614	 	
Global Reinsurance*	  	 	490	 	  	 	383	 	
Financial Services	  	 	526	 	  	 	476	 	
 	  				  				
Total	  	$	2,930	 	  	$	1,986	 	
 	  				  				
Net Premiums Earned	  	 	 	 	  	 	 	 	
Insurance—North American	  	$	753	 	  	$	473	 	
Insurance—Overseas General	  	 	814	 	  	 	509	 	
Global Reinsurance*	  	 	296	 	  	 	144	 	
Financial Services	  	 	209	 	  	 	234	 	
 	  				  				
Total	  	$	2,072	 	  	$	1,360	 	
 	  				  				
Net Operating Income (Loss)	  	 	 	 	  	 	 	 	
Insurance—North American	  	$	120	 	  	$	94	 	
Insurance—Overseas General	  	 	65	 	  	 	34	 	
Global Reinsurance*	  	 	89	 	  	 	80	 	
Financial Services	  	 	59	 	  	 	47	 	
Corporate & Other	  	 	(54	)	  	 	(39	)	
 	  				  				
Total	  	$	279	 	  	$	216	 	

*	 	Includes both property and casualty reinsurance and life reinsurance business	
 
# # #
 
6

ACE Limited
Financial Supplement
 
March 31, 2003
 
Investor Contact:	    	Helen M. Wilson
(441) 299-9283	  	This report is for informational purposes only. It should be read in conjunction with documents filed by ACE Limited with the Securities and Exchange Commission, including the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.	
 	    	(441) 292-8675 fax	  		
 	    	email: investorrelations@ace.bm	  		
 
Application of the Safe Harbor of the Private Securities Litigation Reform Act of 1995:
 
Any forward-looking statements made in this financial supplement reflect the Company’s current views with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties which may cause actual results to differ materially from those set forth in these statements. For example, the Company’s forward-looking statements concerning reserves and recoverables could be affected by the frequency of unpredictable catastrophic events, actual loss experience which differs from the Company’s assumptions, uncertainties in the reserving or settlement process, the impact of aggregate policy coverage limits, the impact of bankruptcies of various asbestos producers and related business, new theories of liability, judicial and legislative developments, litigation tactics, credit developments among reinsurers and other factors identified in the Company’s filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 and in the Company’s earnings press release, which is available on the Company’s website. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

ACE Limited
 
 Financial Supplement Table of Contents
 
 	  	Page
	
I. Financial Highlights	  	1	
		
II. Consolidated Results	  	 	
—   Consolidated Statements of Operations	  	2	
—   Computation of Basic and Diluted Earnings Per Share	  	3	
—   Summary Consolidated Balance Sheets	  	4	
		
III. Segment Results	  	 	
—   Consolidating Statement of Operations	  	5-6	
—   Insurance—  North American	  	7	
—   Premiums by Line of Business	  	8	
—   Insurance—  Overseas General	  	9	
—   Premiums by Line of Business	  	10	
—   Key Components	  	11	
—   Global Reinsurance	  	12	
—   Premiums by Line of Business	  	13	
—   Key Components	  	14	
—   Corporate & Other	  	15	
—   Consolidated Property and Casualty excluding Financial Services	  	16	
—   Financial Services	  	17	
—   Premiums by Line of Business	  	18	
—   Key Component—Financial Guaranty Profile	  	19-21	
—   Consolidated Results—Consecutive Quarters	  	22	
—   Premiums by Line of Business	  	23	
		
IV. Balance Sheet Details	  	 	
—   Reinsurance Recoverable	  	24-26	
—   Unpaid Loss and Loss Expenses	  	27	
—   Asbestos and Environmental Reserves; September 11, 2001 Tragedy	  	28	
—   Capital Structure	  	29	
—   Investment Portfolio	  	30-31	
—   Realized and Unrealized Gains (losses)	  	32	
		
V. Reconciliation to Generally Accepted Accounting Principles	  	 	
—   Regulation G, Non-GAAP Financial Measures	  	33	
—   Consolidated Statement of Comprehensive Income	  	33	
—   Reconciliation of Book Value Per Share to Diluted Book Value Per Share	  	34	
		
VI. Glossary	  	35	

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

 	  	Three months ended March 31	  	% Change 1Q-03 vs.
1Q-02
	
 	  	2003
	  	2002
	  		
Gross premiums written	  	$	4,113	  	$	3,118	  	32%	
Net premiums written	  	$	2,930	  	$	1,986	  	48%	
Net premiums earned	  	$	2,072	  	$	1,360	  	52%	
Net investment income	  	$	206	  	$	200	  	3%	
Net operating income	  	$	279	  	$	216	  	29%	
Net income	  	$	247	  	$	198	  	25%	
Comprehensive income	  	$	345	  	$	113	  	205%	
Operating cash flow	  	$	600	  	$	144	  	317%	
P&C combined ratio: (1)	  	 	 	  	 	 	  	 	
Loss and loss expense ratio	  	 	61.8%	  	 	60.0%	  	 	
Underwriting and administrative expense ratio	  	 	28.8%	  	 	32.7%	  	 	
 	  			  			  	 	
Combined ratio	  	 	90.6%	  	 	92.7%	  	 	
Annualized operating return on equity	  	 	16.7%	  	 	13.6%	  	 	
Diluted earnings per share:	  	 	 	  	 	 	  	 	
Net operating income	  	$	1.02	  	$	0.77	  	32%	
Net income	  	$	0.90	  	$	0.70	  	29%	
Diluted book value per share	  	$	25.14	  	$	23.78	  	6%	
Diluted tangible book value per share	  	$	15.72	  	$	14.19	  	11%	
Weighted average diluted shares outstanding	  	 	268.0	  	 	271.5	  	 	

(1)	 	Property and casualty operations only.	
 
1

ACE Limited
 
 Consolidated Statements of Operations
(in millions of U.S. dollars)
(Unaudited)
 
 	    	Three months ended March 31
	 	    	1Q-03 vs. 1Q-02
	
 	    	2003
	 	    	2002
	 	    		
Gross premiums written	    	$	4,113	 	    	$	3,118	 	    	32%	
Net premiums written	    	 	2,930	 	    	 	1,986	 	    	48%	
Net premiums earned	    	 	2,072	 	    	 	1,360	 	    	52%	
Losses and loss expenses	    	 	1,283	 	    	 	853	 	    	50%	
Life and annuity benefits	    	 	48	 	    	 	23	 	    	109%	
Policy acquisition costs	    	 	296	 	    	 	198	 	    	49%	
Administrative expenses	    	 	260	 	    	 	197	 	    	32%	
 	    				    				    		
Underwriting income	    	 	185	 	    	 	89	 	    	108%	
Net investment income	    	 	206	 	    	 	200	 	    	3%	
Other income (expense)	    	 	(6	)	    	 	5	 	    	NM	
Interest expense	    	 	45	 	    	 	46	 	    	-2%	
Income tax expense	    	 	61	 	    	 	32	 	    	91%	
 	    				    				    		
Net operating income	    	 	279	 	    	 	216	 	    	29%	
Net realized gains (losses)	    	 	(40	)	    	 	(26	)	    	 	
Tax effect of net realized gains (losses)	    	 	8	 	    	 	8	 	    	 	
 	    				    				    		
Net income	    	$	247	 	    	$	198	 	    	25%	

2

ACE Limited
 
 Computation of Basic and Diluted Earnings Per Share
(in millions of U.S. dollars, except share and per share data)
(Unaudited)
 
 	  	Three months ended March 31
	 	
 	  	2003
	 	  	2002
	 	
Numerator:	  	 	 	 	  	 	 	 	
Net operating income	  	$	279	 	  	$	216	 	
Mezzanine equity dividend	  	 	(7	)	  	 	(7	)	
 	  				  				
Net operating income available to the holders of Ordinary Shares	  	 	272	 	  	 	209	 	
Net realized gains (losses), net of income tax	  	 	(32	)	  	 	(18	)	
 	  				  				
Net income available to the holders of Ordinary Shares	  	$	240	 	  	$	191	 	
 	  				  				
Rollforward of Ordinary Shares:	  	 	 	 	  	 	 	 	
Ordinary Shares—Beginning of period	  	 	262,679,356	 	  	 	259,861,205	 	
Issued under ESPP	  	 	135,803	 	  	 	113,364	 	
Restricted stock cancelled/granted	  	 	1,492,847	 	  	 	493,247	 	
Issued for option exercises	  	 	183,813	 	  	 	1,429,617	 	
 	  				  				
Ordinary Shares—End of period	  	 	264,491,819	 	  	 	261,897,433	 	
 	  				  				
Denominator:	  	 	 	 	  	 	 	 	
Weighted average shares outstanding	  	 	260,986,223	 	  	 	258,586,011	 	
Dilutive effect of mezzanine equity	  	 	916,016	 	  	 	4,094,287	 	
Effect of other dilutive securities	  	 	6,138,426	 	  	 	8,846,955	 	
 	  				  				
Adjusted weighted average shares outstanding and assumed conversions	  	 	268,040,665	 	  	 	271,527,253	 	
 	  				  				
Basic earnings per share:	  	 	 	 	  	 	 	 	
Net operating income	  	$	1.04	 	  	$	0.81	 	
Net realized gains (losses)	  	 	(0.12	)	  	 	(0.07	)	
 	  				  				
Net income	  	$	0.92	 	  	$	0.74	 	
 	  				  				
Diluted earnings (loss) per share:	  	 	 	 	  	 	 	 	
Net operating income	  	$	1.02	 	  	$	0.77	 	
Net realized gains (losses)	  	 	(0.12	)	  	 	(0.07	)	
 	  				  				
Net income	  	$	0.90	 	  	$	0.70	 	

3

ACE Limited
 
 Summary Consolidated Balance Sheets
(in millions of U.S. dollars)
 
 	  	March 31 2003
	  	December 31 2002
	  	March 31 2002
	
Assets	  	 	 	  	 	 	  	 	 	
 	  	(Unaudited)	  	(Audited)	  	(Unaudited)	
Fixed maturities available for sale, at fair value	  	$	15,044	  	$	14,420	  	$	12,796	
Equity securities, at fair value	  	 	410	  	 	411	  	 	513	
Securities on loan, at fair value	  	 	521	  	 	293	  	 	241	
Short-term investments	  	 	2,081	  	 	1,885	  	 	1,648	
Other investments, at fair value	  	 	685	  	 	652	  	 	552	
Cash	  	 	477	  	 	663	  	 	820	
 	  			  			  			
Total investments and cash	  	$	19,218	  	$	18,324	  	$	16,570	
Insurance and reinsurance balances receivable	  	 	3,228	  	 	2,654	  	 	3,162	
Reinsurance recoverable	  	 	14,132	  	 	13,991	  	 	11,370	
Deferred policy acquisition costs	  	 	915	  	 	832	  	 	725	
Prepaid reinsurance premiums	  	 	1,790	  	 	1,721	  	 	1,463	
Goodwill	  	 	2,711	  	 	2,717	  	 	2,772	
Deferred tax assets	  	 	1,227	  	 	1,288	  	 	1,240	
Other assets	  	 	2,235	  	 	1,924	  	 	1,432	
 	  			  			  			
Total assets	  	$	45,456	  	$	43,451	  	$	38,734	
 	  			  			  			
Liabilities	  	 	 	  	 	 	  	 	 	
Unpaid losses and loss expenses	  	$	24,636	  	$	24,315	  	$	20,515	
Unearned premiums	  	 	6,573	  	 	5,586	  	 	4,675	
Future policy benefits for life and annuity contracts	  	 	459	  	 	442	  	 	405	
Insurance and reinsurance balances payable	  	 	1,963	  	 	1,870	  	 	1,717	
Contract holder deposit funds	  	 	89	  	 	90	  	 	97	
Securities lending collateral	  	 	533	  	 	301	  	 	247	
Accounts payable, accrued expenses and other liabilities	  	 	1,820	  	 	1,777	  	 	1,440	
Short-term debt	  	 	146	  	 	146	  	 	399	
Long-term debt	  	 	1,749	  	 	1,749	  	 	1,849	
Trust preferred securities	  	 	475	  	 	475	  	 	875	
 	  			  			  			
Total liabilities	  	$	38,443	  	$	36,751	  	$	32,219	
 	  			  			  			
Mezzanine equity	  	$	311	  	$	311	  	$	311	
 	  			  			  			
Shareholders’ equity	  	 	 	  	 	 	  	 	 	
Total shareholders’ equity, excl. AOCI	  	 	6,164	  	$	5,949	  	$	6,188	
Accumulated other comprehensive income (AOCI)	  	 	538	  	 	440	  	 	16	
 	  			  			  			
Total shareholders’ equity	  	$	6,702	  	$	6,389	  	$	6,204	
 	  			  			  			
Total liabilities, mezzanine equity and shareholders’ equity	  	$	45,456	  	$	43,451	  	$	38,734	
 	  			  			  			
Diluted book value per share	  	$	25.14	  	$	24.16	  	$	23.78	
Diluted tangible book value per share	  	$	15.72	  	$	14.56	  	$	14.19	
 
4

ACE Limited
 
 Consolidating Statement of Operations
 
Three months ended March 31, 2003
(in millions of U.S. dollars)
(Unaudited)
 
 	  	Insurance—
North American
	 	  	Insurance—
Overseas General
	 	  	Global Reinsurance
	  	Corporate & Other
	 	  	Consolidated P&C
	 	  	Financial Services
	 	  	ACE Consolidated
	 	
Gross premiums written	  	$	1,664	 	  	$	1,406	 	  	$	462	  	$	—  	 	  	$	3,532	 	  	$	532	 	  	$	4,064	 	
Net premiums written	  	 	933	 	  	 	981	 	  	 	443	  	 	—  	 	  	 	2,357	 	  	 	526	 	  	 	2,883	 	
Net premiums earned	  	 	753	 	  	 	814	 	  	 	248	  	 	—  	 	  	 	1,815	 	  	 	209	 	  	 	2,024	 	
Losses and loss expenses	  	 	512	 	  	 	494	 	  	 	116	  	 	—  	 	  	 	1,122	 	  	 	161	 	  	 	1,283	 	
Policy acquisition costs	  	 	83	 	  	 	152	 	  	 	46	  	 	—  	 	  	 	281	 	  	 	11	 	  	 	292	 	
Administrative expenses	  	 	88	 	  	 	114	 	  	 	15	  	 	24	 	  	 	241	 	  	 	18	 	  	 	259	 	
 	  				  				  			  				  				  				  				
Underwriting income (loss)	  	 	70	 	  	 	54	 	  	 	71	  	 	(24	)	  	 	171	 	  	 	19	 	  	 	190	 	
 	  				  				  			  				  				  				  				
Life underwriting income	  	 	—  	 	  	 	—  	 	  	 	2	  	 	—  	 	  	 	2	 	  	 	—  	 	  	 	2	 	
Net investment income—property and casualty	  	 	103	 	  	 	35	 	  	 	19	  	 	(9	)	  	 	148	 	  	 	51	 	  	 	199	 	
Other income (expense)	  	 	(6	)	  	 	(1	)	  	 	1	  	 	—  	 	  	 	(6	)	  	 	—  	 	  	 	(6	)	
Interest expense	  	 	8	 	  	 	—  	 	  	 	—  	  	 	35	 	  	 	43	 	  	 	2	 	  	 	45	 	
Income tax expense (benefit)	  	 	39	 	  	 	23	 	  	 	4	  	 	(14	)	  	 	52	 	  	 	9	 	  	 	61	 	
 	  				  				  			  				  				  				  				
Net operating income (loss)	  	 	120	 	  	 	65	 	  	 	89	  	 	(54	)	  	 	220	 	  	 	59	 	  	 	279	 	
Net realized gains (losses)	  	 	(18	)	  	 	(13	)	  	 	3	  	 	(9	)	  	 	(37	)	  	 	(3	)	  	 	(40	)	
Tax effect of net realized gains (losses)	  	 	3	 	  	 	5	 	  	 	—  	  	 	—  	 	  	 	8	 	  	 	—  	 	  	 	8	 	
 	  				  				  			  				  				  				  				
Net income (loss)	  	$	105	 	  	$	57	 	  	$	92	  	$	(63	)	  	$	191	 	  	$	56	 	  	$	247	 	
 	  				  				  			  				  				  				  				
Net premiums written/gross premiums written	  	 	56.1%	 	  	 	69.8%	 	  	 	95.9%	  	 	—  	 	  	 	66.7%	 	  	 	98.9%	 	  	 	70.9%	 	
Effective tax rate	  	 	24.5%	 	  	 	26.1%	 	  	 	4.3%	  	 	20.6%	 	  	 	19.1%	 	  	 	13.2%	 	  	 	17.9%	 	
Loss and loss expense ratio	  	 	68.0%	 	  	 	60.7%	 	  	 	46.7%	  	 	 	 	  	 	61.8%	 	  	 	77.0%	 	  	 	63.4%	 	
Policy acquisition cost ratio	  	 	11.0%	 	  	 	18.7%	 	  	 	18.6%	  	 	 	 	  	 	15.5%	 	  	 	5.2%	 	  	 	14.4%	 	
Administrative expense ratio	  	 	11.6%	 	  	 	14.0%	 	  	 	6.0%	  	 	 	 	  	 	13.3%	 	  	 	8.6%	 	  	 	12.8%	 	
 	  				  				  			  	 	 	 	  				  				  				
Combined ratio	  	 	90.6%	 	  	 	93.4%	 	  	 	71.3%	  	 	 	 	  	 	90.6%	 	  	 	90.8%	 	  	 	90.6%	 	

5

 
ACE Limited
 
Consolidating Statement of Operations
 
Three months ended March 31, 2002
(in millions of U.S. dollars)
(Unaudited)
 
 	  	Insurance—
North American
	 	  	Insurance—
Overseas General
	 	  	Global Reinsurance
	 	  	Corporate & Other
	 	  	Consolidated P&C
	 	  	Financial Services
	 	  	ACE Consolidated
	 	
Gross premiums written	  	$	1,265	 	  	$	962	 	  	$	374	 	  	$	—  	 	  	$	2,601	 	  	$	488	 	  	$	3,089	 	
Net premiums written	  	 	513	 	  	 	614	 	  	 	355	 	  	 	—  	 	  	 	1,482	 	  	 	476	 	  	 	1,958	 	
Net premiums earned	  	 	473	 	  	 	509	 	  	 	115	 	  	 	—  	 	  	 	1,097	 	  	 	234	 	  	 	1,331	 	
Losses and loss expenses	  	 	327	 	  	 	292	 	  	 	39	 	  	 	—  	 	  	 	658	 	  	 	195	 	  	 	853	 	
Policy acquisition costs	  	 	42	 	  	 	114	 	  	 	17	 	  	 	—  	 	  	 	173	 	  	 	18	 	  	 	191	 	
Administrative expenses	  	 	71	 	  	 	86	 	  	 	6	 	  	 	23	 	  	 	186	 	  	 	10	 	  	 	196	 	
 	  				  				  				  				  				  				  				
Underwriting income (loss)	  	 	33	 	  	 	17	 	  	 	53	 	  	 	(23	)	  	 	80	 	  	 	11	 	  	 	91	 	
 	  				  				  				  				  				  				  				
Life underwriting income	  	 	—  	 	  	 	—  	 	  	 	4	 	  	 	—  	 	  	 	4	 	  	 	—  	 	  	 	4	 	
Net investment income—property and casualty	  	 	102	 	  	 	21	 	  	 	24	 	  	 	(2	)	  	 	145	 	  	 	49	 	  	 	194	 	
Other income (expense)	  	 	1	 	  	 	4	 	  	 	—  	 	  	 	—  	 	  	 	5	 	  	 	—  	 	  	 	5	 	
Interest expense	  	 	9	 	  	 	—  	 	  	 	1	 	  	 	32	 	  	 	42	 	  	 	4	 	  	 	46	 	
Income tax expense (benefit)	  	 	33	 	  	 	8	 	  	 	—  	 	  	 	(18	)	  	 	23	 	  	 	9	 	  	 	32	 	
 	  				  				  				  				  				  				  				
Net operating income (loss)	  	 	94	 	  	 	34	 	  	 	80	 	  	 	(39	)	  	 	169	 	  	 	47	 	  	 	216	 	
Net realized gains (losses)	  	 	(20	)	  	 	(5	)	  	 	(3	)	  	 	7	 	  	 	(21	)	  	 	(5	)	  	 	(26	)	
Tax effect of net realized gains (losses)	  	 	8	 	  	 	1	 	  	 	—  	 	  	 	—  	 	  	 	9	 	  	 	(1	)	  	 	8	 	
 	  				  				  				  				  				  				  				
Net income (loss)	  	$	82	 	  	$	30	 	  	$	77	 	  	$	(32	)	  	$	157	 	  	$	41	 	  	$	198	 	
 	  				  				  				  				  				  				  				
Net premiums written/gross premiums written	  	 	40.6%	 	  	 	63.8%	 	  	 	94.9%	 	  	 	—  	 	  	 	57.0%	 	  	 	97.5%	 	  	 	63.4%	 	
Effective tax rate	  	 	26.0%	 	  	 	19.0%	 	  	 	0.0%	 	  	 	31.6%	 	  	 	12.0%	 	  	 	16.1%	 	  	 	12.9%	 	
Loss and loss expense ratio	  	 	69.2%	 	  	 	57.3%	 	  	 	34.1%	 	  	 	 	 	  	 	60.0%	 	  	 	83.1%	 	  	 	64.1%	 	
Policy acquisition cost ratio	  	 	8.9%	 	  	 	22.3%	 	  	 	14.3%	 	  	 	 	 	  	 	15.7%	 	  	 	7.9%	 	  	 	14.3%	 	
Administrative expense ratio	  	 	15.0%	 	  	 	17.0%	 	  	 	5.6%	 	  	 	 	 	  	 	17.0%	 	  	 	4.3%	 	  	 	14.7%	 	
 	  				  				  				  	 	 	 	  				  				  				
Combined ratio	  	 	93.1%	 	  	 	96.6%	 	  	 	54.0%	 	  	 	 	 	  	 	92.7%	 	  	 	95.3%	 	  	 	93.1%	 	

6

 
ACE Limited
 
 Segment Results—Consecutive Quarters
(in millions of U.S. dollars)
(Unaudited)
 
 	  	1Q-03
	 	  	4Q-02
	 	  	3Q-02
	 	  	2Q-02
	 	  	1Q-02
	 	  	% Change 1Q-03 vs. 1Q-02
	  	Full Year 2002
	 	  	Full Year 2001
	 	
Insurance—North American	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	  	 	 	 	  	 	 	 	
Gross premiums written	  	$	1,664	 	  	$	1,640	 	  	$	1,783	 	  	$	1,428	 	  	$	1,265	 	  	32%	  	$	6,116	 	  	$	4,521	 	
Net premiums written	  	 	933	 	  	 	819	 	  	 	869	 	  	 	718	 	  	 	513	 	  	82%	  	 	2,919	 	  	 	1,986	 	
Net premiums earned	  	 	753	 	  	 	742	 	  	 	654	 	  	 	606	 	  	 	473	 	  	59%	  	 	2,475	 	  	 	1,816	 	
Losses and loss expenses	  	 	512	 	  	 	1,024	 	  	 	453	 	  	 	396	 	  	 	327	 	  	57%	  	 	2,200	 	  	 	1,373	 	
Policy acquisition costs	  	 	83	 	  	 	69	 	  	 	55	 	  	 	50	 	  	 	42	 	  	98%	  	 	216	 	  	 	206	 	
Administrative expenses	  	 	88	 	  	 	97	 	  	 	86	 	  	 	87	 	  	 	71	 	  	24%	  	 	341	 	  	 	315	 	
 	  				  				  				  				  				  		  				  				
Underwriting income (loss)	  	 	70	 	  	 	(448	)	  	 	60	 	  	 	73	 	  	 	33	 	  	112%	  	 	(282	)	  	 	(78	)	
Net investment income—property and casualty	  	 	103	 	  	 	100	 	  	 	101	 	  	 	103	 	  	 	102	 	  	1%	  	 	406	 	  	 	426	 	
Other income (expense)	  	 	(6	)	  	 	1	 	  	 	—  	 	  	 	(1	)	  	 	1	 	  	 	  	 	1	 	  	 	1	 	
Interest expense	  	 	8	 	  	 	8	 	  	 	7	 	  	 	8	 	  	 	9	 	  	 	  	 	32	 	  	 	37	 	
Income tax expense (benefit)	  	 	39	 	  	 	(119	)	  	 	41	 	  	 	41	 	  	 	33	 	  	 	  	 	(4	)	  	 	94	 	
Amortization of goodwill	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	  	 	—  	 	  	 	—  	 	
 	  				  				  				  				  				  		  				  				
Net operating income (loss)	  	 	120	 	  	 	(236	)	  	 	113	 	  	 	126	 	  	 	94	 	  	28%	  	 	97	 	  	 	218	 	
Net realized gains (losses)	  	 	(18	)	  	 	(92	)	  	 	(55	)	  	 	(32	)	  	 	(20	)	  	 	  	 	(199	)	  	 	(19	)	
Tax effect of net realized gains (losses)	  	 	3	 	  	 	27	 	  	 	4	 	  	 	4	 	  	 	8	 	  	 	  	 	43	 	  	 	8	 	
 	  				  				  				  				  				  		  				  				
Net income (loss)	  	$	105	 	  	$	(301	)	  	$	62	 	  	$	98	 	  	$	82	 	  	28%	  	$	(59	)	  	$	207	 	
 	  				  				  				  				  				  		  				  				
Net premiums written/gross premiums written	  	 	56.1%	 	  	 	49.9%	 	  	 	48.7%	 	  	 	50.3%	 	  	 	40.6%	 	  	 	  	 	47.7%	 	  	 	43.9%	 	
Effective tax rate	  	 	24.5%	 	  	 	33.5%	 	  	 	26.6%	 	  	 	24.6%	 	  	 	26.0%	 	  	 	  	 	-4.3%	 	  	 	30.1%	 	
Loss and loss expense ratio	  	 	68.0%	 	  	 	137.9%	 	  	 	69.2%	 	  	 	65.4%	 	  	 	69.2%	 	  	 	  	 	88.9%	 	  	 	75.6%	 	
Policy acquisition cost ratio	  	 	11.0%	 	  	 	9.4%	 	  	 	8.3%	 	  	 	8.3%	 	  	 	8.9%	 	  	 	  	 	8.7%	 	  	 	11.3%	 	
Administrative expense ratio	  	 	11.6%	 	  	 	13.0%	 	  	 	13.2%	 	  	 	14.3%	 	  	 	15.0%	 	  	 	  	 	13.8%	 	  	 	17.4%	 	
 	  				  				  				  				  				  	 	  				  				
Combined ratio	  	 	90.6%	 	  	 	160.3%	 	  	 	90.7%	 	  	 	88.0%	 	  	 	93.1%	 	  	 	  	 	111.4%	 	  	 	104.3%	 	
Large losses and other items:	  	 	 	 	  	 	(1	)	  	 	 	 	  	 	 	 	  	 	 	 	  	 	  	 	(1	)	  	 	(2	)	
Large losses (before tax)	  	$	—  	 	  	$	516	 	  	$	—  	 	  	$	—  	 	  	$	—  	 	  	 	  	$	516	 	  	$	159	 	
Large losses (after tax)	  	$	—  	 	  	$	354	 	  	$	—  	 	  	$	—  	 	  	$	—  	 	  	 	  	$	354	 	  	$	143	 	
Excluding A&E charge:	  	 	 	 	  	 	(1	)	  	 	 	 	  	 	 	 	  	 	 	 	  	 	  	 	 	 	  	 	 	 	
Underwriting income	  	 	 	 	  	$	68	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	  	$	234	 	  	 	 	 	
Net operating income	  	 	 	 	  	$	118	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	  	$	451	 	  	 	 	 	
Net income	  	 	 	 	  	$	53	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	  	$	295	 	  	 	 	 	
Loss and loss expense ratio	  	 	 	 	  	 	68.4%	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	  	 	68.0%	 	  	 	 	 	
Combined ratio	  	 	 	 	  	 	90.8%	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	  	 	90.5%	 	  	 	 	 	

(1)	 	Reported in press release on January 27, 2003.	
(2)	 	September 11, 2001 tragedy (See Note 5 to the Consolidated Financial Statements included in the 2002 Annual Report on Form 10-K). Amount also includes $18M of losses reported in the press release on July 18, 2001.	
 
7

ACE Limited
 
 Premiums By Line of Business; Insurance—North American
(in millions of U.S. dollars)
(Unaudited)
 
 	  	 	  	 	  	 	  	 	  	 	  	% Change
1Q-03 vs.
1Q-02
	  	Full Year 2002
	  	Full Year 2001
	
 	  	1Q-03
	  	4Q-02
	  	3Q-02
	  	2Q-02
	  	1Q-02
	  		  		  		
Gross Premiums Written:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
Property & casualty	  	$	1,594	  	$	1,593	  	$	1,752	  	$	1,398	  	$	1,241	  	28.4%	  	$	5,984	  	$	4,521	
Life, accident & health	  	 	70	  	 	47	  	 	31	  	 	30	  	 	24	  	191.7%	  	 	132	  	 	—  	
Financial guaranty	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
Financial solutions	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
 	  			  			  			  			  			  		  			  			
 	  	$	1,664	  	$	1,640	  	$	1,783	  	$	1,428	  	$	1,265	  	31.5%	  	$	6,116	  	$	4,521	
 	  			  			  			  			  			  		  			  			
Net Premiums Written:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
Property & casualty	  	$	900	  	$	797	  	$	854	  	$	700	  	$	495	  	81.8%	  	$	2,846	  	$	1,986	
Life, accident & health	  	 	33	  	 	22	  	 	15	  	 	18	  	 	18	  	83.3%	  	 	73	  	 	—  	
Financial guaranty	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
Financial solutions	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
 	  			  			  			  			  			  		  			  			
 	  	$	933	  	$	819	  	$	869	  	$	718	  	$	513	  	81.9%	  	$	2,919	  	$	1,986	
 	  			  			  			  			  			  		  			  			
Net Premiums Earned:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
Property & casualty	  	$	723	  	$	721	  	$	637	  	$	586	  	$	450	  	60.7%	  	$	2,394	  	$	1,812	
Life, accident & health	  	 	30	  	 	21	  	 	17	  	 	20	  	 	23	  	30.4%	  	 	81	  	 	4	
Financial guaranty	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
Financial solutions	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
 	  			  			  			  			  			  		  			  			
 	  	$	753	  	$	742	  	$	654	  	$	606	  	$	473	  	59.2%	  	$	2,475	  	$	1,816	

8

 
 ACE Limited
 
Segment Results—Consecutive Quarters
(in millions of U.S. dollars)
(Unaudited)
 
 	  	1Q-03
	 	  	4Q-02
	 	  	3Q-02
	 	  	2Q-02
	 	  	1Q-02
	 	  	% Change 1Q-03 vs. 1Q-02
	  	Full Year 2002
	 	  	Full Year 2001
	 	
Insurance—Overseas General	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	  	 	 	 	  	 	 	 	
Gross premiums written	  	$	1,406	 	  	$	1,203	 	  	$	1,008	 	  	$	941	 	  	$	962	 	  	46%	  	$	4,114	 	  	$	3,289	 	
Net premiums written	  	 	981	 	  	 	796	 	  	 	690	 	  	 	616	 	  	 	614	 	  	60%	  	 	2,716	 	  	 	2,154	 	
Net premiums earned	  	 	814	 	  	 	671	 	  	 	647	 	  	 	566	 	  	 	509	 	  	60%	  	 	2,393	 	  	 	1,941	 	
Losses and loss expenses	  	 	494	 	  	 	372	 	  	 	446	 	  	 	345	 	  	 	292	 	  	69%	  	 	1,455	 	  	 	1,465	 	
Policy acquisition costs	  	 	152	 	  	 	151	 	  	 	140	 	  	 	128	 	  	 	114	 	  	33%	  	 	533	 	  	 	445	 	
Administrative expenses	  	 	114	 	  	 	108	 	  	 	107	 	  	 	89	 	  	 	86	 	  	33%	  	 	390	 	  	 	333	 	
 	  				  				  				  				  				  		  				  				
Underwriting income (loss) (1)	  	 	54	 	  	 	40	 	  	 	(46	)	  	 	4	 	  	 	17	 	  	218%	  	 	15	 	  	 	(302	)	
Net investment income—property and casualty	  	 	35	 	  	 	31	 	  	 	28	 	  	 	28	 	  	 	21	 	  	67%	  	 	108	 	  	 	102	 	
Other income (expense)	  	 	(1	)	  	 	(1	)	  	 	(1	)	  	 	—  	 	  	 	4	 	  	 	  	 	2	 	  	 	(1	)	
Interest expense	  	 	—  	 	  	 	1	 	  	 	1	 	  	 	1	 	  	 	—  	 	  	 	  	 	3	 	  	 	2	 	
Income tax expense (benefit) (1)	  	 	23	 	  	 	(3	)	  	 	(4	)	  	 	5	 	  	 	8	 	  	 	  	 	6	 	  	 	(87	)	
Amortization of goodwill	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	  	 	—  	 	  	 	3	 	
 	  				  				  				  				  				  		  				  				
Net operating income (loss)	  	 	65	 	  	 	72	 	  	 	(16	)	  	 	26	 	  	 	34	 	  	91%	  	 	116	 	  	 	(119	)	
Net realized gains (losses)	  	 	(13	)	  	 	(5	)	  	 	(21	)	  	 	(6	)	  	 	(5	)	  	 	  	 	(37	)	  	 	(5	)	
Tax effect of net realized gains (losses)	  	 	5	 	  	 	2	 	  	 	7	 	  	 	2	 	  	 	1	 	  	 	  	 	12	 	  	 	2	 	
 	  				  				  				  				  				  		  				  				
Net income (loss)	  	$	57	 	  	$	69	 	  	$	(30	)	  	$	22	 	  	$	30	 	  	90%	  	$	91	 	  	$	(122	)	
 	  				  				  				  				  				  		  				  				
Net premiums written/gross premiums written	  	 	69.8%	 	  	 	66.2%	 	  	 	68.5%	 	  	 	65.5%	 	  	 	63.8%	 	  	 	  	 	66.0%	 	  	 	65.5%	 	
Effective tax rate	  	 	26.1%	 	  	 	-4.3%	 	  	 	20.0%	 	  	 	16.1%	 	  	 	19.0%	 	  	 	  	 	4.9%	 	  	 	42.2%	 	
Loss and loss expense ratio	  	 	60.7%	 	  	 	55.5%	 	  	 	68.9%	 	  	 	61.1%	 	  	 	57.3%	 	  	 	  	 	60.8%	 	  	 	75.5%	 	
Policy acquisition cost ratio	  	 	18.7%	 	  	 	22.4%	 	  	 	21.8%	 	  	 	22.6%	 	  	 	22.3%	 	  	 	  	 	22.3%	 	  	 	22.9%	 	
Administrative expense ratio (1)	  	 	14.0%	 	  	 	16.2%	 	  	 	16.5%	 	  	 	15.5%	 	  	 	17.0%	 	  	 	  	 	16.3%	 	  	 	17.2%	 	
 	  				  				  				  				  				  	 	  				  				
Combined ratio	  	 	93.4%	 	  	 	94.1%	 	  	 	107.2%	 	  	 	99.2%	 	  	 	96.6%	 	  	 	  	 	99.4%	 	  	 	115.6%	 	
Large losses and other items:	  	 	 	 	  	 	 	 	  	 	(2	)	  	 	 	 	  	 	 	 	  	 	  	 	(2	)	  	 	(3	)	
Large losses (before tax)	  	$	—  	 	  	$	—  	 	  	$	68	 	  	$	—  	 	  	$	—  	 	  	 	  	$	68	 	  	$	290	 	
Large losses (after tax)	  	$	—  	 	  	$	—  	 	  	$	61	 	  	$	—  	 	  	$	—  	 	  	 	  	$	61	 	  	$	216	 	

(1)	 	Restated to include expenses reported as non-recurring in 2001.	
(2)	 	Reported in press release on September 18, 2002. Total after tax $90 million includes $61M in Overseas General and $29M in Global Reisurance.	
(3)	 	September 11, 2001 tragedy (See Note 5 to the Consolidated Financial Statements included in the 2002 Annual Report on Form 10-K). Amount also includes losses reported in the press release of January 8, 2002.	
 
9

 
ACE Limited
 
 Premiums By Line of Business; Insurance-Overseas General
(in millions of U.S. dollars)
(Unaudited)
 
 	  	1Q-03
	  	4Q-02
	  	3Q-02
	  	2Q-02
	  	1Q-02
	  	% Change 1Q-03 vs. 1Q-02
	  	Full Year 2002
	  	Full Year 2001
	
Gross Premiums Written:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
Property & casualty	  	$	1,156	  	$	1,026	  	$	837	  	$	776	  	$	788	  	46.7%	  	$	3,427	  	$	2,680	
Life, accident & health	  	 	250	  	 	177	  	 	171	  	 	165	  	 	174	  	43.7%	  	 	687	  	 	609	
Financial guaranty	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
Financial solutions	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
 	  			  			  			  			  			  		  			  			
 	  	$	1,406	  	$	1,203	  	$	1,008	  	$	941	  	$	962	  	46.2%	  	$	4,114	  	$	3,289	
 	  			  			  			  			  			  		  			  			
Net Premiums Written:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
Property & casualty	  	$	770	  	$	643	  	$	543	  	$	463	  	$	472	  	63.1%	  	$	2,121	  	$	1,633	
Life, accident & health	  	 	211	  	 	153	  	 	147	  	 	153	  	 	142	  	48.6%	  	 	595	  	 	521	
Financial guaranty	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
Financial solutions	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
 	  			  			  			  			  			  		  			  			
 	  	$	981	  	$	796	  	$	690	  	$	616	  	$	614	  	59.8%	  	$	2,716	  	$	2,154	
 	  			  			  			  			  			  		  			  			
Net Premiums Earned:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
Property & casualty	  	$	633	  	$	510	  	$	489	  	$	433	  	$	385	  	64.4%	  	$	1,817	  	$	1,427	
Life, accident & health	  	 	181	  	 	161	  	 	158	  	 	133	  	 	124	  	46.0%	  	 	576	  	 	511	
Financial guaranty	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
Financial solutions	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	3	
 	  			  			  			  			  			  		  			  			
 	  	$	814	  	$	671	  	$	647	  	$	566	  	$	509	  	59.9%	  	$	2,393	  	$	1,941	

10

 
ACE Limited
 
 Segment—Key Components
(in millions of U.S. dollars)
(Unaudited)
 
 	  	1Q-03
	  	4Q-02
	  	3Q-02
	  	2Q-02
	  	1Q-02
	  	% Change 1Q-03 vs. 1Q-02
	  	Full Year 2002
	  	Full Year 2001
	
Insurance—Overseas General	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
Gross Premiums Written:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
ACE Global Markets	  	$	346	  	$	511	  	$	325	  	$	314	  	$	301	  	15.0%	  	$	1,451	  	$	1,179	
ACE International	  	 	1,060	  	 	692	  	 	683	  	 	627	  	 	661	  	60.4%	  	 	2,663	  	 	2,110	
 	  			  			  			  			  			  		  			  			
Total	  	$	1,406	  	$	1,203	  	$	1,008	  	$	941	  	$	962	  	46.2%	  	$	4,114	  	$	3,289	
 	  			  			  			  			  			  		  			  			
Net Premiums Written:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
ACE Global Markets	  	$	256	  	$	282	  	$	196	  	$	160	  	$	149	  	71.8%	  	$	787	  	$	712	
ACE International	  	 	725	  	 	514	  	 	494	  	 	456	  	 	465	  	55.9%	  	 	1,929	  	 	1,442	
 	  			  			  			  			  			  		  			  			
Total	  	$	981	  	$	796	  	$	690	  	$	616	  	$	614	  	59.8%	  	$	2,716	  	$	2,154	
 	  			  			  			  			  			  		  			  			
Net Premiums Earned:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
ACE Global Markets	  	$	248	  	$	177	  	$	181	  	$	159	  	$	145	  	71.0%	  	$	662	  	$	563	
ACE International	  	 	566	  	 	494	  	 	466	  	 	407	  	 	364	  	55.5%	  	 	1,731	  	 	1,378	
 	  			  			  			  			  			  		  			  			
Total	  	$	814	  	$	671	  	$	647	  	$	566	  	$	509	  	59.9%	  	$	2,393	  	$	1,941	
 	  			  			  			  			  			  		  			  			
Net Premiums Written/Gross	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
Premiums Written:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
ACE Global Markets	  	 	74.0%	  	 	55.2%	  	 	60.3%	  	 	51.0%	  	 	49.5%	  	49.5%	  	 	54.2%	  	 	60.4%	
ACE International	  	 	68.4%	  	 	74.3%	  	 	72.3%	  	 	72.7%	  	 	70.3%	  	-2.8%	  	 	72.4%	  	 	68.3%	
 	  			  			  			  			  			  		  			  			
Total	  	 	69.8%	  	 	66.2%	  	 	68.5%	  	 	65.5%	  	 	63.8%	  	9.3%	  	 	66.0%	  	 	65.5%	
 	  			  			  			  			  			  		  			  			
Loss Ratio:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
ACE Global Markets	  	 	61.2%	  	 	51.3%	  	 	69.7%	  	 	65.2%	  	 	51.7%	  	18.4%	  	 	59.7%	  	 	77.9%	
ACE International	  	 	60.4%	  	 	56.9%	  	 	68.6%	  	 	59.5%	  	 	59.5%	  	1.5%	  	 	61.2%	  	 	74.5%	
 	  			  			  			  			  			  		  			  			
Total	  	 	60.7%	  	 	55.5%	  	 	68.9%	  	 	61.1%	  	 	57.3%	  	5.9%	  	 	60.8%	  	 	75.5%	
 	  			  			  			  			  			  		  			  			
Expense Ratio:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
ACE Global Markets	  	 	36.7%	  	 	52.1%	  	 	46.8%	  	 	45.2%	  	 	55.2%	  	-33.5%	  	 	49.6%	  	 	46.4%	
ACE International	  	 	30.9%	  	 	33.9%	  	 	35.0%	  	 	35.4%	  	 	33.0%	  	-6.4%	  	 	34.4%	  	 	37.1%	
 	  			  			  			  			  			  		  			  			
Total	  	 	32.7%	  	 	38.6%	  	 	38.3%	  	 	38.1%	  	 	39.3%	  	-16.8%	  	 	38.6%	  	 	39.7%	
 	  			  			  			  			  			  		  			  			
Combined Ratio:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
ACE Global Markets	  	 	97.9%	  	 	103.4%	  	 	116.5%	  	 	110.4%	  	 	106.9%	  	-8.4%	  	 	109.3%	  	 	124.3%	
ACE International	  	 	91.3%	  	 	90.8%	  	 	103.6%	  	 	94.9%	  	 	92.5%	  	-1.3%	  	 	95.6%	  	 	111.6%	
 	  			  			  			  			  			  		  			  			
Total	  	 	93.4%	  	 	94.1%	  	 	107.2%	  	 	99.2%	  	 	96.6%	  	-3.3%	  	 	99.4%	  	 	115.2%	

11

 ACE Limited
 
Segment Results—Consecutive Quarters
(in millions of U.S. dollars)
(Unaudited)
 
 	  	1Q-03
	  	4Q-02
	  	3Q-02
	 	  	2Q-02
	 	  	1Q-02
	 	  	% Change 1Q-03 vs. 1Q-02
	  	Full Year 2002
	 	  	Full Year 2001
	 	
Global Reinsurance	  	 	 	  	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	  	 	 	 	  	 	 	 	
Property and casualty	  	 	 	  	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	  	 	 	 	  	 	 	 	
Gross premiums written	  	$	462	  	$	113	  	$	186	 	  	$	214	 	  	$	374	 	  	24%	  	$	887	 	  	$	460	 	
Net premiums written	  	 	443	  	 	94	  	 	131	 	  	 	197	 	  	 	355	 	  	25%	  	 	777	 	  	 	354	 	
Net premiums earned	  	 	248	  	 	218	  	 	194	 	  	 	150	 	  	 	115	 	  	116%	  	 	677	 	  	 	324	 	
Losses and loss expenses	  	 	116	  	 	111	  	 	101	 	  	 	53	 	  	 	39	 	  	197%	  	 	304	 	  	 	317	 	
Policy acquisition costs	  	 	46	  	 	40	  	 	37	 	  	 	29	 	  	 	17	 	  	171%	  	 	123	 	  	 	68	 	
Administrative expenses	  	 	15	  	 	14	  	 	11	 	  	 	9	 	  	 	6	 	  	150%	  	 	40	 	  	 	29	 	
 	  			  			  				  				  				  		  				  				
Underwriting income (loss)	  	 	71	  	 	53	  	 	45	 	  	 	59	 	  	 	53	 	  	34%	  	 	210	 	  	 	(90	)	
Life	  	 	 	  	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	  	 	 	 	  	 	 	 	
Gross premiums written	  	 	49	  	 	50	  	 	58	 	  	 	28	 	  	 	29	 	  	69%	  	 	165	 	  	 	414	 	
Net premiums written	  	 	47	  	 	47	  	 	57	 	  	 	27	 	  	 	28	 	  	68%	  	 	159	 	  	 	408	 	
Net premiums earned	  	 	48	  	 	46	  	 	57	 	  	 	26	 	  	 	29	 	  	66%	  	 	158	 	  	 	406	 	
Losses and loss expenses	  	 	48	  	 	52	  	 	60	 	  	 	23	 	  	 	23	 	  	109%	  	 	158	 	  	 	401	 	
Policy acquisition costs	  	 	4	  	 	1	  	 	3	 	  	 	5	 	  	 	7	 	  	-43%	  	 	16	 	  	 	8	 	
Administrative expenses	  	 	1	  	 	1	  	 	2	 	  	 	2	 	  	 	1	 	  	0%	  	 	6	 	  	 	2	 	
Net investment income	  	 	7	  	 	8	  	 	7	 	  	 	6	 	  	 	6	 	  	17%	  	 	27	 	  	 	9	 	
 	  			  			  				  				  				  		  				  				
Underwriting income (loss)	  	 	2	  	 	—  	  	 	(1	)	  	 	2	 	  	 	4	 	  	-50%	  	 	5	 	  	 	4	 	
Net investment income—property and casualty	  	 	19	  	 	19	  	 	20	 	  	 	19	 	  	 	24	 	  	-21%	  	 	82	 	  	 	70	 	
Other income (expense)	  	 	1	  	 	—  	  	 	1	 	  	 	—  	 	  	 	—  	 	  	 	  	 	1	 	  	 	—  	 	
Interest expense	  	 	—  	  	 	—  	  	 	—  	 	  	 	—  	 	  	 	1	 	  	 	  	 	1	 	  	 	1	 	
Income tax expense (benefit)	  	 	4	  	 	—  	  	 	(1	)	  	 	2	 	  	 	—  	 	  	 	  	 	1	 	  	 	(22	)	
Amortization of goodwill	  	 	—  	  	 	—  	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	  	 	—  	 	  	 	14	 	
 	  			  			  				  				  				  		  				  				
Net operating income (loss)	  	 	89	  	 	72	  	 	66	 	  	 	78	 	  	 	80	 	  	11%	  	 	296	 	  	 	(9	)	
Net realized gains (losses)	  	 	3	  	 	—  	  	 	(27	)	  	 	(27	)	  	 	(3	)	  	 	  	 	(57	)	  	 	(16	)	
Tax effect of net realized gains (losses)	  	 	—  	  	 	—  	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	  	 	—  	 	  	 	—  	 	
 	  			  			  				  				  				  		  				  				
Net income (loss)	  	$	92	  	$	72	  	$	39	 	  	$	51	 	  	$	77	 	  	19%	  	$	239	 	  	$	(25	)	
 	  			  			  				  				  				  		  				  				
Net premiums written/gross premiums written	  	 	95.9%	  	 	83.2%	  	 	70.4%	 	  	 	92.1%	 	  	 	94.9%	 	  	 	  	 	87.6%	 	  	 	76.9%	 	
Effective tax rate	  	 	4.3%	  	 	0.0%	  	 	-1.5%	 	  	 	2.5%	 	  	 	0.0%	 	  	 	  	 	0.3%	 	  	 	71.0%	 	
Loss and loss expense ratio	  	 	46.7%	  	 	51.1%	  	 	52.0%	 	  	 	35.0%	 	  	 	34.1%	 	  	 	  	 	44.9%	 	  	 	97.7%	 	
Policy acquisition cost ratio	  	 	18.6%	  	 	18.2%	  	 	19.2%	 	  	 	19.5%	 	  	 	14.3%	 	  	 	  	 	18.1%	 	  	 	21.0%	 	
Administrative expense ratio	  	 	6.0%	  	 	6.5%	  	 	5.2%	 	  	 	6.3%	 	  	 	5.6%	 	  	 	  	 	5.9%	 	  	 	9.0%	 	
 	  			  			  				  				  				  	 	  				  				
Combined ratio	  	 	71.3%	  	 	75.8%	  	 	76.4%	 	  	 	60.8%	 	  	 	54.0%	 	  	 	  	 	68.9%	 	  	 	127.7%	 	
Large losses and other items:	  	 	 	  	 	 	  	 	(1	)	  	 	 	 	  	 	 	 	  	 	  	 	(1	)	  	 	(2	)	
Large losses (before tax)	  	$	—  	  	$	—  	  	$	32	 	  	$	—  	 	  	$	—  	 	  	 	  	$	32	 	  	$	273	 	
Large losses (after tax)	  	$	—  	  	$	—  	  	$	29	 	  	$	—  	 	  	$	—  	 	  	 	  	$	29	 	  	$	238	 	

(1)	 	Reported in press release on September 18, 2002. Total after tax $90 million includes $61M in Overseas General and $29M in Global Reisurance.	
(2)	 	September 11, 2001 tragedy (See Note 5 to the Consolidated Financial Statements included in the 2002 Annual Report on Form 10-K). Amount also includes $37M of losses reported in the press release on July 18, 2001.	
 
12

ACE Limited
 
 Premiums By Line of Business; Global Reinsurance
(in millions of U.S. dollars)
(Unaudited)
 
 	  	 	  	 	  	 	  	 	  	 	  	% Change
1Q-03 vs.
1Q-02
	  	Full Year 2002
	  	Full Year 2001
	
 	  	1Q-03
	  	4Q-02
	  	3Q-02
	  	2Q-02
	  	1Q-02
	  		  		  		
Gross Premiums Written:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
Property & casualty	  	$	462	  	$	113	  	$	186	  	$	214	  	$	374	  	23.5%	  	$	887	  	$	460	
Life, accident & health	  	 	49	  	 	50	  	 	58	  	 	28	  	 	29	  	69.0%	  	 	165	  	 	414	
Financial guaranty	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
Financial solutions	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
 	  			  			  			  			  			  		  			  			
 	  	$	511	  	$	163	  	$	244	  	$	242	  	$	403	  	26.8%	  	$	1,052	  	$	874	
 	  			  			  			  			  			  		  			  			
Net Premiums Written:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
Property & casualty	  	$	443	  	$	94	  	$	131	  	$	197	  	$	355	  	24.8%	  	$	777	  	$	354	
Life, accident & health	  	 	47	  	 	47	  	 	57	  	 	27	  	 	28	  	67.9%	  	 	159	  	 	408	
Financial guaranty	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
Financial solutions	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
 	  			  			  			  			  			  		  			  			
 	  	$	490	  	$	141	  	$	188	  	$	224	  	$	383	  	27.9%	  	$	936	  	$	762	
 	  			  			  			  			  			  		  			  			
Net Premiums Earned:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
Property & casualty	  	$	248	  	$	218	  	$	194	  	$	150	  	$	115	  	115.7%	  	$	677	  	$	324	
Life, accident & health	  	 	48	  	 	46	  	 	57	  	 	26	  	 	29	  	65.5%	  	 	158	  	 	406	
Financial guaranty	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
Financial solutions	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
 	  			  			  			  			  			  		  			  			
 	  	$	296	  	$	264	  	$	251	  	$	176	  	$	144	  	105.6%	  	$	835	  	$	730	

13

ACE Limited
 
 Segment—Key Components
(in millions of U.S. dollars)
(Unaudited)
 
 	  	 	  	 	 	  	 	  	 	  	 	  	% Change
1Q-03 vs.
1Q-02
	  	Full Year 2002
	  	Full Year 2001
	
 	  	1Q-03
	  	4Q-02
	 	  	3Q-02
	  	2Q-02
	  	1Q-02
	  		  		  		
Global Reinsurance—Property & Casualty	  	 	 	  	 	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
Gross Premiums Written:	  	 	 	  	 	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
Tempest Europe	  	$	123	  	$	34	 	  	$	36	  	$	67	  	$	93	  	32.3%	  	$	230	  	$	120	
Tempest USA	  	 	100	  	 	86	 	  	 	69	  	 	47	  	 	32	  	212.5%	  	 	234	  	 	69	
Tempest Bermuda	  	 	239	  	 	(7	)	  	 	81	  	 	100	  	 	249	  	-4.0%	  	 	423	  	 	271	
 	  			  				  			  			  			  		  			  			
 	  	$	462	  	$	113	 	  	$	186	  	$	214	  	$	374	  	23.5%	  	$	887	  	$	460	
 	  			  				  			  			  			  		  			  			
Net Premiums Written:	  	 	 	  	 	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
Tempest Europe	  	$	115	  	$	18	 	  	$	27	  	$	57	  	$	80	  	43.8%	  	$	182	  	$	53	
Tempest USA	  	 	99	  	 	86	 	  	 	69	  	 	47	  	 	32	  	209.4%	  	 	234	  	 	69	
Tempest Bermuda	  	 	229	  	 	(10	)	  	 	35	  	 	93	  	 	243	  	-5.8%	  	 	361	  	 	232	
 	  			  				  			  			  			  		  			  			
 	  	$	443	  	$	94	 	  	$	131	  	$	197	  	$	355	  	24.8%	  	$	777	  	$	354	
 	  			  				  			  			  			  		  			  			
Net Premiums Earned:	  	 	 	  	 	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
Tempest Europe	  	$	69	  	$	45	 	  	$	38	  	$	37	  	$	22	  	213.6%	  	$	142	  	$	60	
Tempest USA	  	 	86	  	 	69	 	  	 	53	  	 	36	  	 	24	  	258.3%	  	 	182	  	 	42	
Tempest Bermuda	  	 	93	  	 	104	 	  	 	103	  	 	77	  	 	69	  	34.8%	  	 	353	  	 	222	
 	  			  				  			  			  			  		  			  			
 	  	$	248	  	$	218	 	  	$	194	  	$	150	  	$	115	  	115.7%	  	$	677	  	$	324	
 	  			  				  			  			  			  		  			  			
Net premiums written/gross premiums written	  	 	 	  	 	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
Tempest Europe	  	 	93.5%	  	 	52.9%	 	  	 	75.0%	  	 	85.1%	  	 	86.0%	  	8.7%	  	 	79.1%	  	 	44.2%	
Tempest USA	  	 	99.0%	  	 	100.0%	 	  	 	100.0%	  	 	100.0%	  	 	100.0%	  	-1.0%	  	 	100.0%	  	 	100.0%	
Tempest Bermuda	  	 	95.8%	  	 	142.9%	 	  	 	43.2%	  	 	93.0%	  	 	97.6%	  	-1.8%	  	 	85.3%	  	 	85.6%	
 	  			  				  			  			  			  		  			  			
 	  	 	95.9%	  	 	83.2%	 	  	 	70.4%	  	 	92.1%	  	 	94.9%	  	1.0%	  	 	87.6%	  	 	77.0%	

14

ACE Limited
 
 Segment—Consecutive Quarters
(in millions of U.S. dollars)
(Unaudited)
 
 	  	1Q-03
	 	  	4Q-02
	 	  	3Q-02 (3)
	 	  	2Q-02 (3)
	 	  	1Q-02
	 	    	% Change vs 1Q-02
	  	Full Year 2002
	 	  	Full Year 2001
	 	
Corporate & Other (1)	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	    	 	  	 	 	 	  	 	 	 	
Administrative expenses	  	$	24	 	  	$	31	 	  	$	29	 	  	$	27	 	  	$	23	 	    	4%	  	$	110	 	  	$	94	 	
 	  				  				  				  				  				    		  				  				
Underwriting income (loss)	  	 	(24	)	  	 	(31	)	  	 	(29	)	  	 	(27	)	  	 	(23	)	    	4%	  	 	(110	)	  	 	(94	)	
Net investment income (2)	  	 	(9	)	  	 	(7	)	  	 	(3	)	  	 	(1	)	  	 	(2	)	    	 	  	 	(13	)	  	 	5	 	
Other income (expense) (3)	  	 	—  	 	  	 	—  	 	  	 	(15	)	  	 	(11	)	  	 	—  	 	    	 	  	 	(26	)	  	 	—  	 	
Interest expense (2)	  	 	35	 	  	 	36	 	  	 	37	 	  	 	40	 	  	 	32	 	    	 	  	 	145	 	  	 	142	 	
Income tax expense (benefit)	  	 	(14	)	  	 	(17	)	  	 	(21	)	  	 	(21	)	  	 	(18	)	    	 	  	 	(77	)	  	 	(76	)	
Amortization of goodwill	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	    	 	  	 	—  	 	  	 	58	 	
 	  				  				  				  				  				    	 	  				  				
Net operating income (loss)	  	 	(54	)	  	 	(57	)	  	 	(63	)	  	 	(58	)	  	 	(39	)	    	 	  	 	(217	)	  	 	(213	)	
Net realized gains (losses)	  	 	(9	)	  	 	(1	)	  	 	(55	)	  	 	(30	)	  	 	7	 	    	 	  	 	(79	)	  	 	(14	)	
Tax effect of net realized gains (losses)	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	    	 	  	 	—  	 	  	 	—  	 	
 	  				  				  				  				  				    	 	  				  				
Net income (loss)	  	$	(63	)	  	$	(58	)	  	$	(118	)	  	$	(88	)	  	$	(32	)	    	 	  	$	(296	)	  	$	(227	)	
 	  				  				  				  				  				    	 	  				  				
Effective tax rate	  	 	20.6%	 	  	 	23.0%	 	  	 	25.0%	 	  	 	26.6%	 	  	 	31.6%	 	    	 	  	 	26.2%	 	  	 	26.3%	 	

(1)	 	Includes ACE Limited and ACE INA Holdings	
(2)	 	Net of intercompany eliminations	
(3)	 	Other income (expense) in Q2 and Q3 of 2002 represents debt prepayment expense. The tax effect in 2Q-02 was $4M and 3Q-02 was $5M.	
 
15

 
 ACE Limited
 
Segment Results—Consecutive Quarters
(in millions of U.S. dollars)
(Unaudited)
 
 	  	1Q-03
	 	  	4Q-02
	 	  	3Q-02
	 	  	2Q-02
	 	  	1Q-02
	 	  	% Change
1Q-03 vs.
1Q-02
	  	Full Year
2002
	 	  	Full Year
2001
	 	
Consolidated Property and Casualty Excluding Financial Services	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	  	 	 	 	  	 	 	 	
Gross premiums written	  	$	3,532	 	  	$	2,956	 	  	$	2,977	 	  	$	2,583	 	  	$	2,601	 	  	36%	  	$	11,117	 	  	$	8,270	 	
Net premiums written	  	 	2,357	 	  	 	1,709	 	  	 	1,690	 	  	 	1,531	 	  	 	1,482	 	  	59%	  	 	6,412	 	  	 	4,494	 	
Net premiums earned	  	 	1,815	 	  	 	1,631	 	  	 	1,495	 	  	 	1,322	 	  	 	1,097	 	  	65%	  	 	5,545	 	  	 	4,081	 	
Losses and loss expenses	  	 	1,122	 	  	 	1,507	 	  	 	1,000	 	  	 	794	 	  	 	658	 	  	71%	  	 	3,959	 	  	 	3,155	 	
Policy acquisition costs	  	 	281	 	  	 	260	 	  	 	232	 	  	 	207	 	  	 	173	 	  	62%	  	 	872	 	  	 	719	 	
Administrative expenses	  	 	241	 	  	 	250	 	  	 	233	 	  	 	212	 	  	 	186	 	  	30%	  	 	881	 	  	 	771	 	
 	  				  				  				  				  				  		  				  				
Underwriting income (loss)	  	 	171	 	  	 	(386	)	  	 	30	 	  	 	109	 	  	 	80	 	  	114%	  	 	(167	)	  	 	(564	)	
Life underwriting income (loss)	  	 	2	 	  	 	—  	 	  	 	(1	)	  	 	2	 	  	 	4	 	  	 	  	 	5	 	  	 	4	 	
Net investment income—property and casualty	  	 	148	 	  	 	143	 	  	 	146	 	  	 	149	 	  	 	145	 	  	2%	  	 	583	 	  	 	603	 	
Other income (expense)	  	 	(6	)	  	 	—  	 	  	 	(15	)	  	 	(12	)	  	 	5	 	  	 	  	 	(22	)	  	 	—  	 	
Interest expense	  	 	43	 	  	 	45	 	  	 	45	 	  	 	49	 	  	 	42	 	  	 	  	 	181	 	  	 	182	 	
Income tax expense (benefit)	  	 	52	 	  	 	(139	)	  	 	15	 	  	 	27	 	  	 	23	 	  	 	  	 	(74	)	  	 	(91	)	
Amortization of goodwill	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	  	 	—  	 	  	 	75	 	
 	  				  				  				  				  				  		  				  				
Net operating income (loss)	  	 	220	 	  	 	(149	)	  	 	100	 	  	 	172	 	  	 	169	 	  	30%	  	 	292	 	  	 	(123	)	
Net realized gains (losses)	  	 	(37	)	  	 	(88	)	  	 	(158	)	  	 	(95	)	  	 	(21	)	  	 	  	 	(362	)	  	 	(54	)	
Tax effect of net realized gains (losses)	  	 	8	 	  	 	19	 	  	 	11	 	  	 	6	 	  	 	9	 	  	 	  	 	45	 	  	 	10	 	
Cumulative effect of adopting a new acct’ standard	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	  	 	—  	 	  	 	—  	 	
 	  				  				  				  				  				  		  				  				
Net income (loss)	  	$	191	 	  	$	(218	)	  	$	(47	)	  	$	83	 	  	$	157	 	  	22%	  	$	(25	)	  	$	(167	)	
 	  				  				  				  				  				  		  				  				
Net premiums written/gross premiums written	  	 	66.7%	 	  	 	57.8%	 	  	 	56.8%	 	  	 	59.3%	 	  	 	57.0%	 	  	 	  	 	57.7%	 	  	 	54.3%	 	
Effective tax rate	  	 	19.1%	 	  	 	48.3%	 	  	 	13.0%	 	  	 	13.6%	 	  	 	12.0%	 	  	 	  	 	-33.9%	 	  	 	42.5%	 	
Loss and loss expense ratio	  	 	61.8%	 	  	 	92.4%	 	  	 	66.8%	 	  	 	60.1%	 	  	 	60.0%	 	  	 	  	 	71.4%	 	  	 	77.3%	 	
Policy acquisition cost ratio	  	 	15.5%	 	  	 	15.9%	 	  	 	15.6%	 	  	 	15.7%	 	  	 	15.7%	 	  	 	  	 	15.7%	 	  	 	17.6%	 	
Administrative expense ratio	  	 	13.3%	 	  	 	15.4%	 	  	 	15.6%	 	  	 	16.0%	 	  	 	17.0%	 	  	 	  	 	15.9%	 	  	 	18.9%	 	
 	  				  				  				  				  				  	 	  				  				
Combined ratio	  	 	90.6%	 	  	 	123.7%	 	  	 	98.0%	 	  	 	91.8%	 	  	 	92.7%	 	  	 	  	 	103.0%	 	  	 	113.8%	 	
 
16

 
 ACE Limited
 
Segment Results—Consecutive Quarters
(in millions of U.S. dollars)
(Unaudited)
 
 	  	1Q-03
	 	  	4Q-02
	  	3Q-02
	 	  	2Q-02
	 	  	1Q-02
	 	  	% Change
1Q-03 vs.
1Q-02
	  	Full Year
2002
	 	  	Full Year
2001
	 	
Financial Services	  	 	 	 	  	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	  	 	 	 	  	 	 	 	
Gross premiums written	  	 	532	 	  	$	238	  	$	493	 	  	$	318	 	  	$	488	 	  	9%	  	$	1,537	 	  	$	1,481	 	
Net premiums written	  	 	526	 	  	 	228	  	 	476	 	  	 	317	 	  	 	476	 	  	11%	  	 	1,497	 	  	 	1,461	 	
Net premiums earned	  	 	209	 	  	 	292	  	 	373	 	  	 	228	 	  	 	234	 	  	-11%	  	 	1,127	 	  	 	1,429	 	
Losses and loss expenses	  	 	161	 	  	 	257	  	 	328	 	  	 	167	 	  	 	195	 	  	-17%	  	 	947	 	  	 	1,397	 	
Policy acquisition costs	  	 	11	 	  	 	14	  	 	18	 	  	 	22	 	  	 	18	 	  	-39%	  	 	72	 	  	 	58	 	
Administrative expenses	  	 	18	 	  	 	15	  	 	15	 	  	 	17	 	  	 	10	 	  	80%	  	 	57	 	  	 	56	 	
 	  				  			  				  				  				  		  				  				
Underwriting income (loss)	  	 	19	 	  	 	6	  	 	12	 	  	 	22	 	  	 	11	 	  	73%	  	 	51	 	  	 	(82	)	
		
Net investment income	  	 	51	 	  	 	51	  	 	46	 	  	 	46	 	  	 	49	 	  	4%	  	 	192	 	  	 	173	 	
Other income	  	 	—  	 	  	 	1	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	  	 	1	 	  	 	1	 	
Interest expense	  	 	2	 	  	 	2	  	 	3	 	  	 	3	 	  	 	4	 	  	 	  	 	12	 	  	 	17	 	
Income tax expense	  	 	9	 	  	 	6	  	 	7	 	  	 	8	 	  	 	9	 	  	 	  	 	30	 	  	 	21	 	
Amortization of goodwill	  	 	—  	 	  	 	—  	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	  	 	—  	 	  	 	4	 	
 	  				  			  				  				  				  		  				  				
Net operating income	  	 	59	 	  	 	50	  	 	48	 	  	 	57	 	  	 	47	 	  	26%	  	 	202	 	  	 	50	 	
		
Net realized gains (losses)	  	 	(3	)	  	 	—  	  	 	(77	)	  	 	(45	)	  	 	(5	)	  	 	  	 	(126	)	  	 	(4	)	
Tax effect of net realized gains (losses)	  	 	—  	 	  	 	—  	  	 	19	 	  	 	9	 	  	 	(1	)	  	 	  	 	26	 	  	 	(2	)	
Cumulative effect of adopting a new acct' standard	  	 	—  	 	  	 	—  	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	  	 	—  	 	  	 	(23	)	
 	  				  			  				  				  				  		  				  				
Net income (loss)	  	$	56	 	  	$	50	  	$	(10	)	  	$	21	 	  	$	41	 	  	37%	  	$	102	 	  	$	21	 	
 	  				  			  				  				  				  		  				  				
Net premiums written/gross premiums written	  	 	98.9%	 	  	 	95.8%	  	 	96.6%	 	  	 	99.7%	 	  	 	97.5%	 	  	 	  	 	97.4%	 	  	 	98.6%	 	
Effective tax rate	  	 	13.2%	 	  	 	10.7%	  	 	12.7%	 	  	 	12.3%	 	  	 	16.1%	 	  	 	  	 	12.9%	 	  	 	29.6%	 	
		
Loss and loss expense ratio	  	 	77.0%	 	  	 	88.2%	  	 	88.0%	 	  	 	73.2%	 	  	 	83.1%	 	  	 	  	 	84.0%	 	  	 	97.8%	 	
Policy acquisition cost ratio	  	 	5.2%	 	  	 	5.0%	  	 	4.6%	 	  	 	9.6%	 	  	 	7.9%	 	  	 	  	 	6.4%	 	  	 	4.0%	 	
Administrative expense ratio	  	 	8.6%	 	  	 	4.6%	  	 	4.2%	 	  	 	7.4%	 	  	 	4.3%	 	  	 	  	 	5.0%	 	  	 	3.9%	 	
 	  				  			  				  				  				  	 	  				  				
Combined ratio	  	 	90.8%	 	  	 	97.8%	  	 	96.8%	 	  	 	90.2%	 	  	 	95.3%	 	  	 	  	 	95.4%	 	  	 	105.7%	 	
		
Large losses and other items:	  	 	 	 	  	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	  	 	 	 	  	 	 	 	
Loss portfolio transfers**	  	$	—  	 	  	$	99	  	$	187	 	  	$	25	 	  	$	—  	 	  	 	  	$	311	 	  	$	642	 	
September 11, 2001 tragedy (before and after tax)	  	 	 	 	  	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	  	 	 	 	  	$	147	(1)	

**	 	Total premiums typically included in gross premiums written, net premiums written, and net premiums earned in the quarter it is written; usually accrued at 100% loss ratio.	
(1)	 	September 11, 2001 tragedy (See Note 5 to the Consolidated Financial Statements included in the 2002 Annual Report on Form 10-K).	
 
17

 
ACE Limited
 
 Premiums By Line of Business; Financial Services
(in millions of U.S. dollars)
(Unaudited)
 
 	  	1Q-03
	  	4Q-02
	  	3Q-02
	  	2Q-02
	  	1Q-02
	  	% Change 1Q-03 vs. 1Q-02
	  	Full Year 2002
	  	Full Year 2001
	
Gross Premiums Written:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
Property & casualty	  	$	—  	  	$	—  	  	$	—  	  	$	—  	  	$	—  	  	—  	  	$	—  	  	$	—  	
Life, accident & health	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
Financial guaranty	  	 	121	  	 	97	  	 	147	  	 	82	  	 	65	  	86.2%	  	 	391	  	 	292	
Financial solutions	  	 	411	  	 	141	  	 	346	  	 	236	  	 	423	  	-2.8%	  	 	1,146	  	 	1,189	
 	  			  			  			  			  			  		  			  			
 	  	$	532	  	$	238	  	$	493	  	$	318	  	$	488	  	9.0%	  	$	1,537	  	$	1,481	
 	  			  			  			  			  			  		  			  			
Net Premiums Written:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
Property & casualty	  	$	—  	  	$	—  	  	$	—  	  	$	—  	  	$	—  	  	—  	  	$	—  	  	$	—  	
Life, accident & health	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
Financial guaranty	  	 	120	  	 	96	  	 	146	  	 	82	  	 	63	  	90.5%	  	 	387	  	 	284	
Financial solutions	  	 	406	  	 	132	  	 	330	  	 	235	  	 	413	  	-1.7%	  	 	1,110	  	 	1,177	
 	  			  			  			  			  			  		  			  			
 	  	$	526	  	$	228	  	$	476	  	$	317	  	$	476	  	10.5%	  	$	1,497	  	$	1,461	
 	  			  			  			  			  			  		  			  			
Net Premiums Earned:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	 	 	  	 	 	
Property & casualty	  	$	—  	  	$	—  	  	$	—  	  	$	—  	  	$	—  	  	—  	  	$	—  	  	$	—  	
Life, accident & health	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	 	—  	  	—  	  	 	—  	  	 	—  	
Financial guaranty	  	 	88	  	 	81	  	 	46	  	 	81	  	 	74	  	18.9%	  	 	282	  	 	352	
Financial solutions	  	 	121	  	 	211	  	 	327	  	 	147	  	 	160	  	-24.4%	  	 	845	  	 	1,077	
 	  			  			  			  			  			  		  			  			
 	  	$	209	  	$	292	  	$	373	  	$	228	  	$	234	  	-10.7%	  	$	1,127	  	$	1,429	

18

ACE Limited
 Segment—Key Component
Financial Guaranty Profile
 
Through its Financial Services segment, the Company is an active participant in the financial guaranty market. The Company’s financial guaranty exposure comprises exposure to municipal and non-municipal obligations. At March 31, 2003, the Company had total financial guaranty exposure outstanding of $82.6 billion of which 60.0 percent represented exposure to municipal obligations and 40.0 percent to non-municipal obligations.
 
The financial guaranty portfolio is broadly diversified by payment source, geographic location, and maturity schedule. The Company limits its exposure to losses by underwriting primarily investment grade obligations. The following details the composition of the Company’s financial guaranty business:
 
 	  	March 31, 2003
	  	December 31, 2002
	
Sector
	  	Par Outstanding
	  	%
	  	Average Rating
	  	Par Outstanding
	  	%
	  	Average Rating
	
 	  	(in millions of U.S. dollars)	
Municipal Exposure:	  	 	 	  	 	  	 	  	 	 	  	 	  	 	
Tax backed	  	$	19,614	  	23.8%	  	A+	  	$	19,637	  	24.0%	  	A+	
Municipal utilities	  	 	10,523	  	12.7%	  	A+	  	 	10,390	  	12.7%	  	A+	
Special revenue	  	 	8,536	  	10.3%	  	A	  	 	8,596	  	10.5%	  	A	
Healthcare	  	 	5,494	  	6.7%	  	A	  	 	5,798	  	7.1%	  	A	
Structured municipal(1)	  	 	3,378	  	4.1%	  	AAA	  	 	3,523	  	4.3%	  	AAA	
Other municipal(2)	  	 	1,980	  	2.4%	  	A-	  	 	2,151	  	2.7%	  	A-	
 	  			  		  		  			  		  		
Total Municipal	  	 	49,525	  	60.0%	  	A	  	 	50,095	  	61.3%	  	A	
Non-Municipal Exposure:	  	 	 	  	 	  	 	  	 	 	  	 	  	 	
Senior layer CDOs(3)	  	$	13,680	  	16.6%	  	AA+	  	$	12,727	  	15.6%	  	AA+	
Consumer receivables(4)	  	 	9,018	  	10.9%	  	A	  	 	8,388	  	10.3%	  	A	
Single name corporate CDS	  	 	4,283	  	5.2%	  	A+	  	 	4,454	  	5.4%	  	A+	
Commercial receivables(5)	  	 	3,826	  	4.6%	  	A	  	 	3,464	  	4.2%	  	A+	
Other structured finance(6)	  	 	1,685	  	2.0%	  	A+	  	 	2,051	  	2.5%	  	A	
Funded equity CDOs(3)	  	 	580	  	0.7%	  	NM	  	 	586	  	0.7%	  	NM	
 	  			  		  		  			  		  		
Total Non-Municipal	  	 	33,072	  	40.0%	  	AA - 	  	 	31,670	  	38.7%	  	AA - 	
 	  			  		  		  			  		  		
Total Exposure	  	$	82,597	  	100%	  	 	  	$	81,765	  	100.0%	  	 	

(1)	 	Structured Municipal: includes excess of loss reinsurance on portfolios of municipal credits where the Company attached in excess of the AAA rating level.	
(2)	 	Other Municipal: primarily includes first mortgage bonds on investor-owned utilities and government-sponsored project finance.	
(3)	 	For ACE, collateralized debt obligations (CDOs) are structured financings backed by a pool of investment grade assets. These financings are typically structured in multiple tranches (layers) from equity (first loss) through super senior (high excess). Losses on defaulted pool assets are allocated successively first to the equity tranche then to higher rated tranches. Market supply and demand factors influence pricing and the amount and position in the structure where ACE chooses to participate.	
(4)	 	Consumer Receivables: principally includes auto loan receivables, residential mortgage-backed securities and credit card receivables.	
(5)	 	Commercial Receivables: principally includes equipment leases and commercial mortgage-backed securities.	
(6)	 	Other Structured Finance: predominantly trade receivable securitization, secured structured lending, and future flow transactions.	
 
19

 
ACE Limited
Segment—Key Component
Financial Guaranty Profile
 
The greatest proportion of the Company’s municipal financial guaranty exposure (23.7%), comprises general obligation bonds that are supported by the issuer’s taxing authority and of special revenue bonds and other special obligations of states and local governments that are supported by the issuer’s ability to impose and collect fees and charges for public services or specific projects. Maturities for municipal obligations can range from one to 30 years, with the average maturity in the 12-15 year range. The weighted average credit quality of the municipal portfolio was A as of March 31, 2003.
 
The Company’s non-municipal exposure includes exposure to asset-backed obligations, including those backed by consumer receivables, commercial receivables and collateralized debt obligations (“CDOs”) as well as single name corporate obligations. Legal maturities for non-municipal transactions range from 1-30 years. Maturities of single name corporate credit default swaps (CDS) range from 1-5 years with an average maturity of 1.8 years. The weighted average credit quality of the non-municipal portfolio was AA- as of March 31, 2003.
 
The Company conducts its financial guaranty business by entering into insurance and reinsurance arrangements as well as CDS. Exposure to CDS included in total exposure amounted to $21.5 billion and $20.7 billion at March 31, 2003 and December 31, 2002, respectively. The Company’s principal CDS exposure is to CDOs and single name corporate obligations. The preponderance of the Company’s CDO exposure is highly rated senior layer CDOs. Senior Layer CDOs are structured with first loss protection in the form of subordination or over collateralization so that the Company’s risk typically attaches at or above the AAA rating level. The Company also participates in Funded Equity CDO transactions wherein a substantial portion of the Company’s exposure is mitigated by premium. Rate on line for such transactions is typically 75%-85% of the total exposure.
 
Ratings distributions of the Company’s senior layer CDOs and single name corporate credit default swaps as of March 31, 2003 are shown below:
 
 	    	A
	    	AA
	    	AAA
	    	BBB
	    	BIG
	
Senior Layer CDOs	    	  7.2%	    	15.5%	    	70.2%	    	  6.2%	    	0.9%	
Single Name Corporate CDS	    	49.7%	    	18.5%	    	17.3%	    	11.1%	    	3.4%	
 
20

ACE Limited
Segment—Key Component
Financial Guaranty Profile
 
Because credit default swaps are considered derivative transactions under FAS 133, the Company is required to mark-to-market its outstanding exposure at each financial reporting date. This is in contrast to the accounting treatment for a similar risk that is written as an insurance contract and is required in spite of the fact that the Company does not trade its credit default swap positions. Rather, its business is analogous to a buy and hold strategy. The mark-to-market adjustment reflects the estimated cost to the Company to purchase mirror protection on its outstanding exposures and is not an estimate of expected losses incurred. Expected losses are provided for in outstanding loss reserves, which the Company believes are adequate. In the first quarter, the Company recorded a FAS 133 mark-to-market loss before tax of $2.1 million.
 
The following table summarizes the Company's scheduled outstanding credit default swap portfolio by year as of March 31, 2003:
 
($ billions)	  	2003
	 	  	2004
	 	  	2005
	 	  	2006
	 	  	2007
	 	    	Thereafter
	 	
Senior Layer CDOs	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	    	 	 	
Beginning Outstanding Par	  	13.7	 	  	13.6	 	  	13.1	 	  	10.6	 	  	7.7	 	    	7.2	 	
Runoff Amount	  	(0.1	)	  	(0.5	)	  	(2.5	)	  	(2.9	)	  	(3.4	)	    	(7.2	)	
 	  			  			  			  			  			    			
Ending Outstanding Par	  	13.6	 	  	13.1	 	  	10.6	 	  	7.7	 	  	4.3	 	    	0.0	 	
 	  			  			  			  			  			    			
Single Name Corporate CDS	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	    	 	 	
Beginning Outstanding Par	  	4.3	 	  	3.1	 	  	2.4	 	  	1.2	 	  	1.0	 	    	0.4	 	
Runoff Amount	  	(1.2	)	  	(0.7	)	  	(1.2	)	  	(0.3	)	  	(0.8	)	    	(0.4	)	
 	  			  			  			  			  			    			
Ending Outstanding Par	  	3.1	 	  	2.4	 	  	1.2	 	  	1.0	 	  	0.2	 	    	0.0	 	
 	  			  			  			  			  			    			
Funded Equity CDOs	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	    	 	 	
Beginning Outstanding Par	  	0.6	 	  	0.6	 	  	0.6	 	  	0.6	 	  	0.4	 	    	0.1	 	
Runoff Amount	  	0.0	 	  	0.0	 	  	0.0	 	  	(0.2	)	  	(0.3	)	    	(0.1	)	
 	  			  			  			  			  			    			
Ending Outstanding Par	  	0.6	 	  	0.6	 	  	0.6	 	  	0.4	 	  	0.1	 	    	0.0	 	

21

 ACE Limited
Consolidated Results—Consecutive Quarters
(in millions of U.S. dollars)
(Unaudited)
 
ACE Limited Consolidated
 
 	  	1Q-03
	 	  	4Q-02
	 	  	3Q-02
	 	  	2Q-02
	 	  	1Q-02
	 	  	% Change 1Q-03 vs. 1Q-02
	  	Full Year 2002
	 	  	Full Year 2001
	 	
Gross premiums written	  	$	4,064	 	  	$	3,194	 	  	$	3,470	 	  	$	2,901	 	  	$	3,089	 	  	32%	  	$	12,654	 	  	$	9,751	 	
Net premiums written	  	 	2,883	 	  	 	1,937	 	  	 	2,166	 	  	 	1,848	 	  	 	1,958	 	  	47%	  	 	7,909	 	  	 	5,955	 	
Net premiums earned	  	 	2,024	 	  	 	1,923	 	  	 	1,868	 	  	 	1,550	 	  	 	1,331	 	  	52%	  	 	6,672	 	  	 	5,510	 	
Losses and loss expenses	  	 	1,283	 	  	 	1,764	 	  	 	1,328	 	  	 	961	 	  	 	853	 	  	50%	  	 	4,906	 	  	 	4,552	 	
Policy acquisition costs	  	 	292	 	  	 	274	 	  	 	250	 	  	 	229	 	  	 	191	 	  	53%	  	 	944	 	  	 	777	 	
Administrative expenses (1)	  	 	259	 	  	 	265	 	  	 	248	 	  	 	229	 	  	 	196	 	  	32%	  	 	938	 	  	 	827	 	
 	  				  				  				  				  				  		  				  				
Underwriting income (loss)	  	 	190	 	  	 	(380	)	  	 	42	 	  	 	131	 	  	 	91	 	  	109%	  	 	(116	)	  	 	(646	)	
Life underwriting income (loss)	  	 	2	 	  	 	—  	 	  	 	(1	)	  	 	2	 	  	 	4	 	  	 	  	 	5	 	  	 	4	 	
Net investment income—property and casualty	  	 	199	 	  	 	194	 	  	 	192	 	  	 	195	 	  	 	194	 	  	3%	  	 	775	 	  	 	776	 	
Other income (expense) (2)	  	 	(6	)	  	 	1	 	  	 	(15	)	  	 	(12	)	  	 	5	 	  	 	  	 	(21	)	  	 	1	 	
Interest expense	  	 	45	 	  	 	47	 	  	 	48	 	  	 	52	 	  	 	46	 	  	-2%	  	 	193	 	  	 	199	 	
Income tax expense (benefit) (1)	  	 	61	 	  	 	(133	)	  	 	22	 	  	 	35	 	  	 	32	 	  	 	  	 	(44	)	  	 	(70	)	
Amortization of goodwill	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	  	 	—  	 	  	 	79	 	
 	  				  				  				  				  				  		  				  				
Net operating income (loss)	  	 	279	 	  	 	(99	)	  	 	148	 	  	 	229	 	  	 	216	 	  	29%	  	 	494	 	  	 	(73	)	
Net realized gains (losses)	  	 	(40	)	  	 	(88	)	  	 	(235	)	  	 	(140	)	  	 	(26	)	  	 	  	 	(489	)	  	 	(58	)	
Tax effect of net realized gains (losses)	  	 	8	 	  	 	19	 	  	 	30	 	  	 	15	 	  	 	8	 	  	 	  	 	72	 	  	 	8	 	
Cumulative effect of adopting a new acct' standard	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	  	 	—  	 	  	 	(23	)	
 	  				  				  				  				  				  		  				  				
Net income (loss)	  	$	247	 	  	$	(168	)	  	$	(57	)	  	$	104	 	  	$	198	 	  	25%	  	$	77	 	  	$	(146	)	
 	  				  				  				  				  				  		  				  				
Net premiums written/gross premiums written	  	 	70.9%	 	  	 	60.6%	 	  	 	62.4%	 	  	 	63.7%	 	  	 	63.4%	 	  	 	  	 	62.5%	 	  	 	61.1%	 	
Effective tax rate	  	 	17.9%	 	  	 	57.3%	 	  	 	12.9%	 	  	 	13.3%	 	  	 	12.9%	 	  	 	  	 	-9.8%	 	  	 	49.0%	 	
Loss and loss expense ratio	  	 	63.4%	 	  	 	91.8%	 	  	 	71.0%	 	  	 	62.0%	 	  	 	64.1%	 	  	 	  	 	73.5%	 	  	 	82.6%	 	
Policy acquisition cost ratio	  	 	14.4%	 	  	 	14.3%	 	  	 	13.4%	 	  	 	14.8%	 	  	 	14.3%	 	  	 	  	 	14.2%	 	  	 	14.1%	 	
Administrative expense ratio (1)	  	 	12.8%	 	  	 	13.7%	 	  	 	13.3%	 	  	 	14.7%	 	  	 	14.7%	 	  	 	  	 	14.0%	 	  	 	15.0%	 	
 	  				  				  				  				  				  	 	  				  				
Combined ratio	  	 	90.6%	 	  	 	119.8%	 	  	 	97.7%	 	  	 	91.5%	 	  	 	93.1%	 	  	 	  	 	101.7%	 	  	 	111.7%	 	
Large losses and other items:	  	 	 	 	  	 	(3	)	  	 	(4	)	  	 	 	 	  	 	 	 	  	 	  	 	(3	)(4)	  	 	(5	)	
Large losses (before tax)	  	$	—	 	  	$	516	 	  	$	100	 	  	$	—	 	  	$	—	 	  	 	  	$	616	 	  	$	862	 	
Large losses (after tax)	  	$	—	 	  	$	354	 	  	$	90	 	  	$	—	 	  	$	—	 	  	 	  	$	444	 	  	$	744	 	
Operating cash flow	  	$	600	 	  	$	833	 	  	$	1,020	 	  	$	427	 	  	$	144	 	  	 	  	$	2,424	 	  	$	1,353	 	

(1)	 	Restated to include expenses reported as non-recurring in 2001.	
(2)	 	Other income (expense) in Q2 and Q3 of 2002 represents debt prepayment expense. The tax effect in 2Q-02 was $4M and 3Q-02 was $5M.	
(3)	 	Reported in press release January 27, 2003.	
(4)	 	Reported in press release on September 18, 2002. Total after tax $90 million includes Overseas General and Global Reisurance.	
(5)	 	September 11, 2001 tragedy (See Note 5 to the Consolidated Financial Statements included in the 2002 Annual Report on Form 10-K). Amount includes losses reported in the press release on July 18, 2001 and January 8, 2002.	
 
22

ACE Limited
 Premiums By Line of Business
(in millions of U.S. dollars)
(Unaudited)
 
ACE Limited Consolidated
 
 	  	1Q-03
	  	4Q-02
	  	3Q-02
	  	2Q-02
	  	1Q-02
	  	% Change 1Q-03 vs. 1Q-02
	 	  	Full Year 2002
	  	Full Year 2001
	
Gross Premiums Written :	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Property & casualty	  	$	3,212	  	$	2,732	  	$	2,774	  	$	2,388	  	$	2,404	  	33.6	%	  	$	10,298	  	$	7,661	
Life, accident & health	  	 	369	  	 	274	  	 	261	  	 	223	  	 	226	  	63.3	%	  	 	984	  	 	1,023	
Financial guaranty	  	 	121	  	 	97	  	 	147	  	 	82	  	 	65	  	86.2	%	  	 	391	  	 	292	
Financial solutions	  	 	411	  	 	141	  	 	346	  	 	236	  	 	423	  	-2.8	%	  	 	1,146	  	 	1,189	
 	  			  			  			  			  			  			  			  			
 	  	$	4,113	  	$	3,244	  	$	3,528	  	$	2,929	  	$	3,118	  	31.9	%	  	$	12,819	  	$	10,165	
 	  			  			  			  			  			  			  			  			
Net Premiums Written :	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Property & casualty	  	$	2,113	  	$	1,534	  	$	1,528	  	$	1,360	  	$	1,322	  	59.8	%	  	$	5,744	  	$	3,973	
Life, accident & health	  	 	291	  	 	222	  	 	219	  	 	198	  	 	188	  	54.8	%	  	 	827	  	 	929	
Financial guaranty	  	 	120	  	 	96	  	 	146	  	 	82	  	 	63	  	90.5	%	  	 	387	  	 	284	
Financial solutions	  	 	406	  	 	132	  	 	330	  	 	235	  	 	413	  	-1.7	%	  	 	1,110	  	 	1,177	
 	  			  			  			  			  			  			  			  			
 	  	$	2,930	  	$	1,984	  	$	2,223	  	$	1,875	  	$	1,986	  	47.5	%	  	$	8,068	  	$	6,363	
 	  			  			  			  			  			  			  			  			
Net Premiums Earned :	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Property & casualty	  	$	1,604	  	$	1,449	  	$	1,320	  	$	1,169	  	$	950	  	68.8	%	  	$	4,888	  	$	3,563	
Life, accident & health	  	 	259	  	 	228	  	 	232	  	 	179	  	 	176	  	47.2	%	  	 	815	  	 	921	
Financial guaranty	  	 	88	  	 	81	  	 	46	  	 	81	  	 	74	  	18.9	%	  	 	282	  	 	352	
Financial solutions	  	 	121	  	 	211	  	 	327	  	 	147	  	 	160	  	-24.4	%	  	 	845	  	 	1,080	
 	  			  			  			  			  			  			  			  			
 	  	$	2,072	  	$	1,969	  	$	1,925	  	$	1,576	  	$	1,360	  	52.4	%	  	$	6,830	  	$	5,916	

23

 
 ACE Limited
Reinsurance Recoverable
(in millions of U.S. dollars)
(Unaudited)
 
Net Reinsurance Recoverable by Division
 
 	  	March 31, 2003
	 	  	December 31, 2002
	 	
 	  	Brandywine (Runoff)	 	    	Westchester (Runoff)	 	  	Active Operations	 	  	Total	 	  	Brandywine (Runoff)	 	    	Westchester (Runoff)	 	  	Active Operations	 	  	Total	 	
 	  			  			
Rein. recoverable on paid losses & loss expenses	  	$	397	 	    	$	25	 	  	$	950	 	  	$	1,372	 	  	$	385	 	    	$	27	 	  	$	951	 	  	$	1,363	 	
Rein. recoverable on unpaid losses & loss expenses	  	 	5,218	 	    	 	496	 	  	 	7,997	 	  	 	13,711	 	  	 	5,237	 	    	 	491	 	  	 	7,839	 	  	 	13,567	 	
 	  			  			
Gross reinsurance recoverable	  	 	5,615	 	    	 	521	 	  	 	8,947	 	  	 	15,083	 	  	 	5,622	 	    	 	518	 	  	 	8,790	 	  	 	14,930	 	
Bad debt reserve	  	 	(473	)	    	 	(29	)	  	 	(449	)	  	 	(951	)	  	 	(478	)	    	 	(30	)	  	 	(431	)	  	 	(939	)	
 	  			  			
Net reinsurance recoverable	  	$	5,142	 	    	$	492	 	  	$	8,498	 	  	$	14,132	 	  	$	5,144	 	    	$	488	 	  	$	8,359	 	  	$	13,991	 	

As illustrated in the table above, it is important to consider the composition of the recoverable balance and the related exposures in three components: Brandywine, Westchester and Active Operations recoverable. Active operations include the run-off operations of CIS. Additional information on reinsurance recoverable on a consolidated basis and for active operations for December 31, 2002 can be found on pages 25 and 26, respectively.
 
The Company's obligations with respect to further funding of the Brandywine runoff are limited pursuant to the Brandywine Restructuring Order under an $800 million aggregate excess of loss reinsurance agreement. (Refer to the "Asbestos and Environmental Claims" section of the "Management's Discussion and Analysis of Financial Conditions and Results of Operations" incorporated into our recently filed Form 10-K for the year ended December 31, 2002 for additional information about the order and other Company obligations.) At December 31, 2002, approximately $466 million in losses and recoverable bad debt reserves were ceded to the aggregate excess of loss reinsurance agreement leaving a remaining limit of approximately $334 million.
 
As part of the Westchester acquisition, National Indemnity provided reinsurance protection for all losses occurring prior to 1997. At December 31, 2002, the remaining limit in the reinsurance cover was approximately $600 million.
 
The remaining balance of reinsurance recoverable consist of recoverables primarily associated with active operations.
 
Detail on Reinsurance Recoverable on Paid Losses and Loss Expenses
 
 	  	March 31, 2003
	 	  	December 31, 2002
	 	
Category	  	Gross	  	Bad Debt	  	% of Gross	 	  	Gross	  	Bad Debt	  	% of Gross	 	
	  			  			
General Collections (1)	  	$	848	  	54	  	6.4	%	  	$	848	  	43	  	5.1	%	
Other (2)	  	 	524	  	333	  	63.5	%	  	 	515	  	335	  	65.0	%	
 	  			  			
Total	  	$	1,372	  	387	  	28.2	%	  	$	1,363	  	378	  	27.7	%	

(1)	 	General collections balances represent amounts in process of collection in the normal course of business, for which we have no indication of dispute or credit issues. We provide bad debt reserves based primarily on the application of historical loss experience to credit categories and historical dispute statistics.	
(2)	 	Other includes amounts recoverable that are in dispute, or are from companies who are in supervision, rehabilitation or liquidation. Our estimation of this reserve considers the credit quality of the reinsurer, and whether we have received collateral or other credit protections such as parental guarantees. In addition, we also consider any information we may have regarding the reinsurers plans to dispute amounts recoverable and make judgements based on our knowledge and experience regarding the specific items in dispute.	

24

 
ACE Limited
Reinsurance Recoverable
(in millions of U.S. dollars)
(Unaudited)
 
Consolidated Reinsurance Recoverable
 
 	  	December 31, 2002
	 	
Categories	  	Recoverable	  	Bad Debt	  	% of Gross	 	
	  			
Top 10 reinsurers	  	$	7,732	  	$	93	  	1.2	%	
Other reinsurers balances >$20 million	  	 	2,519	  	 	175	  	6.9	%	
Other reinsurers balances <$20 million	  	 	1,590	  	 	148	  	9.3	%	
Mandatory pools and government agencies	  	 	771	  	 	4	  	0.5	%	
Structured settlements	  	 	730	  	 	3	  	0.4	%	
Captives	  	 	786	  	 	4	  	0.5	%	
Other	  	 	802	  	 	512	  	63.8	%	
 	  			
Total Recoveries	  	$	14,930	  	$	939	  	6.3	%	

At December 31, 2002, $10.5 billion of consolidated recoverables were from rated reinsurers, of which 95% were rated A- or better by Standard & Poor’s.
 
Top 10 Reinsurers	    	Other Reinsurers Balances >$20 million	    	 	
	
AXA	    	ABB Group	    	Independence Blue Cross (Amerihealth)	
Berkshire Hathaway Insurance Group	    	Allianz Group	    	IRB—Brasil Resseguros S.A.	
EQUITAS	    	Allstate Financial	    	Liberty Mutual Insurance Companies	
GE Global Insurance Group	    	American International Group	    	Markel Corporation Group	
Hannover Re	    	Aviva plc	    	Overseas Partners Ltd.	
Lloyd’s of London	    	Chubb Group of Insurance Companies	    	PartnerRe Group	
Munich Re	    	CNA Insurance Companies	    	PMA Capital Insurance Company	
SCOR Group	    	Converium Group	    	RenaissanceRe Holdings Ltd	
Swiss Re Group	    	DaimlerChrysler Group	    	Royal & Sun Alliance Insurance Group plc	
Zurich Financial Services Group	    	Dominion Ins. Co. Ltd.	    	Sompo Japan Insurance Inc	
 	    	Dorinco Reinsurance Co.	    	St. Paul Companies	
 	    	Everest Re Group	    	Toa Reinsurance Company	
 	    	Excess & Casualty Reinsurance Assocation	    	Travelers Property Casualty Group	
 	    	Fairfax Financial	    	Trenwick Group	
 	    	FM Global Group	    	White Mountains Insurance Group	
 	    	Gerling Group	    	XL Capital Group	
 	    	Hartford Insurance Group	    	 	
 
Classification of reinsurer balances excludes any consideration of related collateral or offsetting balances.
 
25

 
ACE Limited
Reinsurance Recoverable
(in millions of U.S. dollars)
(Unaudited)
 
Reinsurance Recoverable for Active Operations
 
 	  	December 31, 2002
	
Categories
	  	Recoverable
	  	Bad Debt
	  	% of Gross
	
Top 10 reinsurers	  	$	4,044	  	$	60	  	1.5%	
Other reinsurers balances >$20 million	  	 	1,384	  	 	87	  	6.3%	
Other reinsurers balances <$20 million	  	 	1,152	  	 	76	  	6.6%	
Mandatory pools and government agencies	  	 	738	  	 	4	  	0.5%	
Structured settlements	  	 	367	  	 	1	  	0.4%	
Captives	  	 	744	  	 	4	  	0.5%	
Other	  	 	361	  	 	199	  	55.1%	
 	  			  			  		
Total Recoveries	  	$	8,790	  	$	431	  	4.9%	

At December 31, 2002, $5.8 billion of the active operations' recoverables were from rated reinsurers, of which 95% were rated A- or better by Standard & Poor's. At December 31, 2002, the $8.8 billion gross balance includes government pools of $738 million and structured settlements with recourse of $367 million, both of which present very limited collectibility exposure. The Company held collateral of $2.1 billion, of which $1.6 billion was matched and usable against existing recoverables.
 
Top 10 Reinsurers	 	Other Reinsurers Balances>$20 million	
	
AXA	 	ABB Group	 	Hartford Insurance Group	
Berkshire Hathaway Insurance Group	 	Allianz Group	 	Independence Blue Cross (Amerihealth)	
GE Global Insurance Group (Employers Re)	 	Allstate Financial	 	IRB—Brasil Resseguros S.A.	
Hannover Re	 	American International Group	 	Liberty Mutual Insurance Companies	
Lloyd’s of London	 	Aviva plc	 	Markel Corporation Group	
Munich Re	 	Chubb Group of Insurance Companies	 	Overseas Partners Ltd.	
SCOR Group	 	CNA Insurance Companies	 	PMA Capital Insurance Group	
Swiss Re Group	 	Converium Group	 	RenaissanceRe Holdings Ltd	
Zurich Financial Services Group	 	DaimlerChrysler Group	 	Royal & Sun Alliance Insurance Group plc	
XL Capital Group	 	Dorinco Reinsurance Co.	 	Sompo Japan Insurance Inc	
 	 	EQUITAS	 	St. Paul Companies	
 	 	Everest Re Group	 	Toa Reinsurance Company	
 	 	Excess & Casualty Reinsurance Assocation	 	Trenwick Group	
 	 	Fairfax Financial	 	 	
 
Classification of reinsurer balances exclude consideration of related collateral or offsetting balances.
 
26

ACE Limited
 Reconciliation of Unpaid Losses and Loss Expenses
(in millions of U.S. dollars)
(Unaudited)
 
 	  	Total
	 	  	Ongoing
	 	  	Runoff (1)
	 	
 	  	Unpaid Losses
	 	  	Unpaid Losses
	 	  	Unpaid Losses
	 	
 	  	Gross
	 	  	Recoverable
	 	  	Net
	 	  	Gross
	 	    	Recoverable
	 	  	Net
	 	  	Gross
	 	    	Recoverable
	 	  	Net
	 	
Balance at December 31, 2001	  	$	20,728	 	  	$	10,629	 	  	$	10,099	 	  	$	13,001	 	    	$	5,381	 	  	$	7,620	 	  	$	7,236	 	    	$	4,757	 	  	$	2,479	 	
Losses and loss expenses incurred	  	 	1,599	 	  	 	746	 	  	 	853	 	  	 	1,465	 	    	 	623	 	  	 	842	 	  	 	134	 	    	 	123	 	  	 	11	 	
Losses and loss expenses paid	  	 	(1,792	)	  	 	(816	)	  	 	(976	)	  	 	(1,501	)	    	 	(686	)	  	 	(815	)	  	 	(291	)	    	 	(130	)	  	 	(161	)	
Other (incl. foreign exch. revaluation)	  	 	(20	)	  	 	26	 	  	 	(46	)	  	 	(20	)	    	 	26	 	  	 	(46	)	  	 	—  	 	    	 	—  	 	  	 	—  	 	
 	  				  				  				  				    				  				  				    				  				
Balance at March 31, 2002	  	$	20,515	 	  	$	10,585	 	  	$	9,930	 	  	$	12,945	 	    	$	5,344	 	  	$	7,601	 	  	$	7,079	 	    	$	4,750	 	  	$	2,329	 	
 	  				  				  				  				    				  				  				    				  				
Losses and loss expenses incurred	  	 	1,806	 	  	 	845	 	  	 	961	 	  	 	1,668	 	    	 	717	 	  	 	951	 	  	 	138	 	    	 	128	 	  	 	10	 	
Losses and loss expenses paid	  	 	(1,739	)	  	 	(699	)	  	 	(1,040	)	  	 	(1,434	)	    	 	(574	)	  	 	(860	)	  	 	(305	)	    	 	(125	)	  	 	(180	)	
Other (incl. foreign exch. revaluation)	  	 	79	 	  	 	26	 	  	 	53	 	  	 	79	 	    	 	26	 	  	 	53	 	  	 	 	 	    	 	 	 	  	 	—  	 	
 	  				  				  				  				    				  				  				    				  				
Balance at June 30, 2002	  	$	20,661	 	  	$	10,757	 	  	$	9,904	 	  	$	13,258	 	    	$	5,513	 	  	$	7,745	 	  	$	6,912	 	    	$	4,753	 	  	$	2,159	 	
 	  				  				  				  				    				  				  				    				  				
Losses and loss expenses incurred	  	 	2,177	 	  	 	849	 	  	 	1,328	 	  	 	2,166	 	    	 	843	 	  	 	1,323	 	  	 	11	 	    	 	6	 	  	 	5	 	
Losses and loss expenses paid	  	 	(1,348	)	  	 	(586	)	  	 	(762	)	  	 	(1,173	)	    	 	(558	)	  	 	(615	)	  	 	(175	)	    	 	(28	)	  	 	(147	)	
Other (incl. foreign exch. revaluation)	  	 	151	 	  	 	11	 	  	 	140	 	  	 	151	 	    	 	11	 	  	 	140	 	  	 	—  	 	    	 	—  	 	  	 	—  	 	
 	  				  				  				  				    				  				  				    				  				
Balance at September 30, 2002	  	$	21,641	 	  	$	11,031	 	  	$	10,610	 	  	$	14,402	 	    	$	5,809	 	  	$	8,593	 	  	$	6,748	 	    	$	4,731	 	  	$	2,017	 	
 	  				  				  				  				    				  				  				    				  				
Losses and loss expenses incurred	  	 	4,530	 	  	 	2,766	 	  	 	1,764	 	  	 	2,400	 	    	 	1,115	 	  	 	1,285	 	  	 	2,130	 	    	 	1,651	 	  	 	479	 	
Losses and loss expenses paid	  	 	(2,023	)	  	 	(851	)	  	 	(1,172	)	  	 	(1,628	)	    	 	(668	)	  	 	(960	)	  	 	(395	)	    	 	(183	)	  	 	(212	)	
Other (incl. foreign exch. revaluation)	  	 	167	 	  	 	51	 	  	 	116	 	  	 	167	 	    	 	51	 	  	 	116	 	  	 	 	 	    	 	 	 	  	 	—  	 	
 	  				  				  				  				    				  				  				    				  				
Balance at December 31, 2002	  	$	24,315	 	  	$	12,997	 	  	$	11,318	 	  	$	15,341	 	    	$	6,307	 	  	$	9,034	 	  	$	8,483	 	    	$	6,199	 	  	$	2,284	 	
 	  				  				  				  				    				  				  				    				  				
Losses and loss expenses incurred	  	 	2,390	 	  	 	1,107	 	  	 	1,283	 	  	 	2,365	 	    	 	1,104	 	  	 	1,261	 	  	 	25	 	    	 	3	 	  	 	22	 	
Losses and loss expenses paid	  	 	(2,155	)	  	 	(984	)	  	 	(1,171	)	  	 	(1,910	)	    	 	(893	)	  	 	(1,017	)	  	 	(245	)	    	 	(91	)	  	 	(154	)	
Other (incl. foreign exch. revaluation)	  	 	86	 	  	 	16	 	  	 	70	 	  	 	79	 	    	 	16	 	  	 	63	 	  	 	7	 	    	 	—  	 	  	 	7	 	
 	  				  				  				  				    				  				  				    				  				
Balance at March 31, 2003	  	$	24,636	 	  	$	13,136	 	  	$	11,500	 	  	$	15,875	 	    	$	6,534	 	  	$	9,341	 	  	$	8,270	 	    	$	6,111	 	  	$	2,159	 	

(1)	 	The run off reserves primarily include Brandywine group, the Commercial Insurance Service—Middle Market Worker's Comp. reserves and the pre-1997 Westchester Specialty reserves. Prior year split between gross and ceded reserves and loss activity in ongoing and runoff categories has been revised to properly reflect intercompany reinsurance eliminations.	
 
27

ACE Limited
 Asbestos and Environmental Reserves; September 11, 2001 Tragedy
(in millions of U.S. dollars)
(Unaudited)
 
Consolidated Asbestos and Environmental:
 
 	  	March 31, 2003
	  	December 31, 2002
	
 	  	Gross
	  	Net
	  	Gross
	  	Net
	
Asbestos reserves	  	$	3,148	  	$	420	  	$	3,192	  	$	446	
Environmental and other latent exposures	  	 	1,307	  	 	366	  	 	1,352	  	 	403	
 	  			  			  			  			
Total	  	$	4,455	  	$	786	  	$	4,544	  	$	849	
 	  			  			  			  			
Asbestos claim payments	  	$	44	  	$	26	  	$	284	  	$	118	
Environmental and other latent exposure claim payments	  	$	45	  	$	37	  	$	311	  	$	195	
Gross 3 year asbestos survival ratio at December 31, 2002	  	 	 	  	 	 	  	 	11.3x	  	 	 	
Gross 1 year asbestos survival ratio at December 31, 2002	  	 	 	  	 	 	  	 	12.0x	  	 	 	
 
September 11, 2001 Tragedy information as of March 31, 2003:
 
 	  	Ultimate Losses
	  	Paid to Date
	  	Unpaid Losses
	
Gross losses	  	$	1,829	  	$	820	  	$	1,009	
Reinsurance recoverable	  	 	1,179	  	 	558	  	 	621	
 	  			  			  			
Net losses	  	$	650	  	$	262	  	$	388	
 	  			  			  			
Recoveries	  	 	 	  	 	 	  	 	 	
Billed to reinsurers	  	$	558	  	 	 	  	 	 	
Collected	  	 	498	  	 	 	  	 	 	
 	  			  	 	 	  	 	 	
Current outstanding	  	$	60	  	 	 	  	 	 	

28

 ACE Limited
Capital Structure
(in millions of U.S. dollars)
 
 	  	March 31 2003 (Unaudited)
	 	  	December 31 2002 (Audited)
	 	  	March 31 2002 (Unaudited)
	 	
Total short-term debt	  	$	146	 	  	$	146	 	  	$	399	 	
Total long-term debt(1)	  	$	1,749	 	  	$	1,749	 	  	$	1,849	 	
 	  				  				  				
Total debt	  	$	1,895	 	  	$	1,895	 	  	$	2,248	 	
 	  				  				  				
Total trust preferreds(2)	  	$	475	 	  	$	475	 	  	$	875	 	
 	  				  				  				
Mezzanine equity(3)	  	$	311	 	  	$	311	 	  	$	311	 	
Shareholders’ equity	  	$	6,702	 	  	$	6,389	 	  	$	6,204	 	
 	  				  				  				
Total capitalization	  	$	9,383	 	  	$	9,070	 	  	$	9,638	 	
Tangible equity(4)	  	$	3,991	 	  	$	3,672	 	  	$	3,432	 	
		
Leverage Ratios:	  	 	 	 	  	 	 	 	  	 	 	 	
Debt/total capitalization	  	 	20.2	%	  	 	20.9	%	  	 	23.3	%	
Debt plus preferreds/total capitalization	  	 	25.3	%	  	 	26.1	%	  	 	32.4	%	
Debt/tangible equity	  	 	47.5	%	  	 	51.6	%	  	 	65.5	%	
Debt plus preferreds and mezzanine equity/tangible equity	  	 	67.2	%	  	 	73.0	%	  	 	100.1	%	

(1)	 	$50 million of ACE INA subordinated notes due 2009 was repaid in both the second and third quarters of 2002. An additional $500 million of Senior Debt was issued by ACE Limited in March 2002.	
(2)	 	$400 million of ACE INA Rhino Preferred Securities due 2002 was repaid in the second and third quarters of 2002.	
(3)	 	The FELINE PRIDES are expected to convert in the second quarter of 2003.	
(4)	 	Tangible equity is equal to Shareholders’ equity less goodwill.	
 
29

ACE Limited
 Fixed Income Investment Portfolio
(in millions of U.S. dollars)
 
 	    	March 31, 2003
	  	 	    	December 31, 2002
	  	 	
Fixed maturities	    	$	15,044	  	 	    	$	14,420	  	 	
Securities on loan	    	 	521	  	 	    	 	293	  	 	
Short term investments	    	 	2,081	  	 	    	 	1,885	  	 	
Cash	    	 	477	  	 	    	 	663	  	 	
 	    			  	 	    			  	 	
 	    	$	18,123	  	 	    	$	17,261	  	 	

 	    	March 31, 2003 Market Value
	  	% of Total
	    	December 31, 2002 Market Value
	  	% of Total
	
Allocation:	    	 	 	  	 	    	 	 	  	 	
Treasury	    	$	859	  	4.7%	    	$	842	  	4.9%	
Agency	    	 	1,074	  	5.9%	    	 	973	  	5.6%	
Corporate	    	 	7,117	  	39.3%	    	 	6,459	  	37.3%	
Mortgage-backed securities	    	 	3,415	  	18.8%	    	 	3,302	  	19.2%	
Asset-backed securities	    	 	338	  	1.9%	    	 	352	  	2.0%	
Municipal	    	 	1,220	  	6.7%	    	 	1,201	  	7.0%	
Non-US	    	 	1,542	  	8.5%	    	 	1,584	  	9.2%	
Cash & cash equivalent	    	 	2,558	  	14.2%	    	 	2,548	  	14.8%	
 	    			  		    			  		
Total	    	$	18,123	  	100.0%	    	$	17,261	  	100.0%	

 	    	March 31, 2003 Market Value
	  	% of Total
	    	December 31, 2002 Market Value
	  	% of Total
	
Credit Quality:	    	 	 	  	 	    	 	 	  	 	
AAA	    	 	8,808	  	48.6%	    	 	8,566	  	49.4%	
AA	    	 	3,265	  	18.0%	    	 	2,880	  	16.7%	
A	    	 	3,027	  	16.7%	    	 	2,920	  	17.0%	
BBB	    	 	1,464	  	8.1%	    	 	1,314	  	7.6%	
BB	    	 	697	  	3.8%	    	 	662	  	3.8%	
B	    	 	791	  	4.4%	    	 	843	  	4.9%	
Other	    	 	71	  	0.4%	    	 	76	  	0.6%	
 	    			  		    			  		
Total	    	$	18,123	  	100.0%	    	$	17,261	  	100%	

Avg. duration of fixed maturities, adj. for int. rate swaps	    	 	 	  	3.1 years	    	 	 	  	3.1 years	
Avg. market yield of fixed maturities	    	 	 	  	4.2%	    	 	 	  	4.4%	
Avg. credit quality	    	 	 	  	AA	    	 	 	  	AA	
 
30

ACE Limited
Investment Information at March 31, 2003
(in millions of U.S. dollars)
 
 	  	March 31, 2003
	  	December 31, 2002
	
 	  	Market Value
	  	Cost/ Amortized cost
	  	Market Value
	  	Cost/ Amortized cost
	
Fixed maturities	  	$	15,044	  	$	14,361	  	$	14,420	  	$	13,791	
Equity securities	  	 	410	  	 	414	  	 	411	  	 	442	
Securities on loan	  	 	521	  	 	494	  	 	293	  	 	286	
Short term investments	  	 	2,081	  	 	2,081	  	 	1,885	  	 	1,885	
Other investments	  	 	685	  	 	657	  	 	652	  	 	622	
Cash	  	 	477	  	 	477	  	 	663	  	 	663	
 	  			  			  			  			
 	  	$	19,218	  	$	18,484	  	$	18,324	  	$	17,689	

Top 10 Exposures—Fixed Income Investments and Single Name Credit Default Swaps

 	    	March 31, 2003
	
General Electric	    	$	287	
General Motors	    	 	170	
Citigroup Inc	    	 	168	
Verizon Communications	    	 	143	
AIG	    	 	118	
Ford Motor Co	    	 	113	
Merrill Lynch	    	 	110	
Morgan Stanley	    	 	108	
Goldman Sachs Group	    	 	101	
HSBC Holdings Plc	    	 	100	
 
 	    	December 31, 2002
	
General Electric	    	$	258	
General Motors	    	 	171	
Citigroup Inc	    	 	154	
Verizon Communications	    	 	127	
AIG	    	 	123	
Ford Motor Co	    	 	123	
Bank of America	    	 	119	
Wachovia Corp	    	 	106	
Wells Fargo	    	 	105	
JP Morgan Chase	    	 	105	
 
31

ACE Limited
 Realized and Unrealized Gains (Losses)
(in millions of U.S. dollars)
 
Quarter ended March 31, 2003
	    	Net Realized Gains (Losses)(1)
	 	    	Net Unrealized Gains (Losses)
	 	  	Net Impact
	 	
Investment Portfolio gains (losses)	    	 	 	 	    	 	 	 	  	 	 	 	
Fixed maturities	    	$	12	 	    	$	56	 	  	$	68	 	
Interest rate swaps	    	 	(9	)	    	 	—	 	  	 	(9	)	
Equity securities	    	 	(50	)	    	 	34	 	  	 	(16	)	
Equity and fixed income derivatives	    	 	—	 	    	 	—	 	  	 	—	 	
Foreign exchange gains (losses)	    	 	9	 	    	 	—	 	  	 	9	 	
Other	    	 	—	 	    	 	(2	)	  	 	(2	)	
 	    				    				  				
 	    	 	(38	)	    	 	88	 	  	 	50	 	
Credit default swaps (FAS 133 adjustment)	    	 	(2	)	    	 	—	 	  	 	(2	)	
 	    				    				  				
Total gains (losses)	    	 	(40	)	    	 	88	 	  	 	48	 	
Income tax (expense) benefit	    	 	8	 	    	 	(9	)	  	 	(1	)	
 	    				    				  				
Net gains (losses)	    	$	(32	)	    	$	79	 	  	$	47	 	

(1)	 	Includes impairments of $18M for fixed maturities and $46M for equities.	
 
Quarter ended March 31, 2002
	    	Net Realized Gains (Losses)(2)
	 	    	Net Unrealized Gains (Losses)
	 	  	Net Impact
	 	
Investment Portfolio gains (losses)	    	 	 	 	    	 	 	 	  	 	 	 	
Fixed maturities	    	$	(14	)	    	$	114	 	  	$	100	 	
Interest rate swaps	    	 	7	 	    	 	—	 	  	 	7	 	
Equity securities	    	 	(2	)	    	 	(4	)	  	 	(6	)	
Equity and fixed income derivatives	    	 	(3	)	    	 	—	 	  	 	(3	)	
Foreign exchange gains (losses)	    	 	(1	)	    	 	—	 	  	 	(1	)	
Other	    	 	—	 	    	 	(6	)	  	 	(6	)	
 	    				    				  				
 	    	 	(13	)	    	 	104	 	  	 	91	 	
Credit default swaps (FAS 133 adjustment)	    	 	(13	)	    	 	—	 	  	 	(13	)	
 	    				    				  				
Total gains (losses)	    	 	(26	)	    	 	104	 	  	 	78	 	
Income tax (expense) benefit	    	 	8	 	    	 	(20	)	  	 	(12	)	
 	    				    				  				
Net gains (losses)	    	$	(18	)	    	$	84	 	  	$	66	 	

(2)	 	Includes impairments of $16M for fixed maturities, $1M for equities.	
 
32

ACE Limited
 Reconciliation to Generally Accepted Accounting Principles
 
Regulation G—Non-GAAP Financial Measures
 
In presenting our operating results, we have included and discussed certain non-GAAP measures. These non-GAAP measures, which may be defined differently by other companies, are important to an understanding of our overall results of operations; however, they should not be viewed as a substitute for measures determined in accordance with GAAP. Net operating income (loss) is a common performance measurement and is defined as net income (loss) excluding net realized gains (losses) on investments, the tax effect of net realized gains (losses) on investments and the cumulative effect of adopting a new accounting standard, net of income tax. We believe this presentation of net operating income (loss) enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business.
 
We exclude net realized gains (losses) on investments from net operating income (loss) because the amount of these gains (losses) is heavily influenced by, and fluctuates in part, according to the availability of market opportunities. The cumulative effect of adopting a new accounting standard is excluded from our calculation of net operating income (loss). We believe these amounts are largely independent of our business and including them would distort the analysis of trends. Net operating income (loss) should not be viewed as a substitute for net income determined in accordance with generally accepted accounting principles (GAAP).
 
 	  	1Q-03
	 	  	4Q-02
	 	  	3Q-02
	 	  	2Q-02
	 	  	1Q-02
	 	  	Full Year 2002
	 	  	Full Year 2001
	 	
Net income (loss), as reported	  	$	247	 	  	$	(168	)	  	$	(57	)	  	$	104	 	  	$	198	 	  	$	77	 	  	$	(146	)	
Net realized gains (losses)	  	 	(40	)	  	 	(88	)	  	 	(235	)	  	 	(140	)	  	 	(26	)	  	 	(489	)	  	 	(58	)	
Tax effect of net realized gains (losses)	  	 	8	 	  	 	19	 	  	 	30	 	  	 	15	 	  	 	8	 	  	 	72	 	  	 	8	 	
Cumulative effect of adopting a new acct' standard	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	(23	)	
 	  				  				  				  				  				  				  				
Net operating income (loss)	  	$	279	 	  	$	(99	)	  	$	148	 	  	$	229	 	  	$	216	 	  	$	494	 	  	$	(73	)	
 	  				  				  				  				  				  				  				
 Consolidated Statement of Comprehensive Income	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Net income (loss)	  	$	247	 	  	$	(168	)	  	$	(57	)	  	$	104	 	  	$	198	 	  	$	77	 	  	$	(146	)	
Net unrealized appreciation (depreciation) on investments	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Unrealized appreciation (depreciation) on investments	  	 	112	 	  	 	131	 	  	 	198	 	  	 	135	 	  	 	(106	)	  	 	358	 	  	 	65	 	
Reclassification adjustment for net realized gains (losses) included in net income	  	 	(23	)	  	 	55	 	  	 	28	 	  	 	13	 	  	 	2	 	  	 	98	 	  	 	(16	)	
Cumulative translation adjustment	  	 	26	 	  	 	(4	)	  	 	4	 	  	 	5	 	  	 	(5	)	  	 	—  	 	  	 	(7	)	
Income tax (expense) benefit related to other comprehensive income items	  	 	(17	)	  	 	(27	)	  	 	(69	)	  	 	(46	)	  	 	24	 	  	 	(118	)	  	 	(10	)	
 	  				  				  				  				  				  				  				
Other comprehensive income (loss)	  	 	98	 	  	 	155	 	  	 	161	 	  	 	107	 	  	 	(85	)	  	 	338	 	  	 	32	 	
 	  				  				  				  				  				  				  				
Comprehensive income (loss)	  	$	345	 	  	$	(13	)	  	$	104	 	  	$	211	 	  	$	113	 	  	$	415	 	  	$	(114	)	

33

 
 ACE Limited
 
Reconciliation to Generally Accepted Accounting Principles
(in millions of U.S. dollars, except  share and per share data)
 
Reconciliation of Book Value Per Share to Diluted Book Value Per Share
 
 	  	March 31, 2003
	  	December 31, 2002
	  	March 31, 2002
	
Shareholders' equity	  	$	6,702	  	$	6,389	  	$	6,204	
Net proceeds from assumed conversions of options	  	 	226	  	 	138	  	 	362	
Conversion of mezzanine equity	  	 	311	  	 	311	  	 	311	
 	  			  			  			
Numerator for diluted book value per share calculation	  	 	7,239	  	 	6,838	  	 	6,877	
Less: goodwill	  	 	2,711	  	 	2,717	  	 	2,772	
 	  			  			  			
Numerator for diluted tangible book value per share	  	$	4,528	  	$	4,121	  	$	4,105	
 	  			  			  			
Ordinary Shares outstanding—end of period	  	 	264,491,819	  	 	262,679,356	  	 	261,897,433	
Shares issued from assumed conversions of options	  	 	11,697,607	  	 	8,560,131	  	 	15,539,693	
Shares issued on conversion of mezzanine equity	  	 	11,814,373	  	 	11,814,373	  	 	11,814,373	
 	  			  			  			
Denominator for diluted and diluted tangible book value	  	 	288,003,799	  	 	283,053,860	  	 	289,251,499	
 	  			  			  			
Book value per share	  	$	25.34	  	$	24.32	  	$	23.69	
Diluted book value per share	  	$	25.14	  	$	24.16	  	$	23.78	
Diluted tangible book value per share	  	$	15.72	  	$	14.56	  	$	14.19	
 
34

 ACE Limited
Glossary
 
Annualized operating return on equity:	  	Calculated using net operating income (loss) less mezzanine equity dividend divided by average shareholders’ equity for the period calculated. To annualize a quarterly rate multiply by four.	
		
Combined ratio:	  	Sum of the loss and loss expense ratio, acquisition cost ratio and the administrative expense ratio for the property and casualty and financial services operations.	
		
Diluted book value per share:	  	Shareholder’s equity and net proceeds from assumed conversions of outstanding in-the-money options divided by the sum of shares outstanding and the number of options assumed issued.	
		
Diluted tangible book value per share:	  	Shareholder’s equity and net assets from assumed conversions of outstanding in-the-money options less goodwill divided by shares outstanding plus the number of options assumed issued.	
		
Effective tax rate:	  	Income tax expense divided by the sum of income tax expense and net operating income (loss).	
		
Life underwriting income:	  	Net premium earned plus net investment income less future policy benefits, acquisition costs and administrative expenses.	
		
Net operating income (loss):	  	Net income (loss) excluding net realized gains (losses) on investments, the tax effect of net realized gains (losses) on investments and the cumulative effect of adopting new accounting standards, net of income tax.	
		
NM:	  	Not meaningful	
		
Operating return on equity:	  	Calculated using net operating income (loss) less mezzanine equity dividend divided by average shareholders’ equity.	
		
Property and casualty combined ratios:	  	Loss and loss expense ratios, policy acquisition cost ratios and administrative expense ratios exclude life reinsurance business and financial services segment.	
		
Tangible equity:	  	Calculated as shareholders’ equity less goodwill.	
		
Total capitalization:	  	The sum of short-term debt, long-term debt, trust preferreds, mezzanine equity and shareholders’ equity.	
 
35