ACE LTD, 10-K filed on 2/28/2013
Annual Report
Document and Entity Information (USD $)
In Billions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Feb. 14, 2013
Jun. 29, 2012
Document Documentand Entity Information [Abstract]
 
 
 
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Dec. 31, 2012 
 
 
Document Fiscal Year Focus
2012 
 
 
Document Fiscal Period Focus
FY 
 
 
Trading Symbol
ACE 
 
 
Entity Registrant Name
ACE Ltd 
 
 
Entity Central Index Key
0000896159 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Common Stock, Shares Outstanding
 
339,318,053 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Public Float
 
 
$ 25 
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Assets
 
 
Fixed maturities available for sale, at fair value (amortized cost - $44,666 and $40,450) (includes hybrid financial instruments of $309 and $357)
$ 47,306 
$ 41,967 
Fixed maturities held to maturity, at amortized cost (fair value - $7,633 and $8,605)
7,270 
8,447 
Equity securities, at fair value (cost - $707 and $671)
744 
647 
Short-term investments, at fair value and amortized cost
2,228 
2,301 
Other investments (cost - $2,465 and $2,112)
2,716 
2,314 
Total investments
60,264 
55,676 
Cash
615 1 2
614 
Securities lending collateral
1,791 
1,375 
Accrued investment income
552 
547 
Insurance and reinsurance balances receivable
4,147 
4,387 
Reinsurance recoverable on losses and loss expenses
12,078 
12,389 
Reinsurance recoverable on policy benefits
241 
249 
Deferred policy acquisition costs
1,873 
1,548 
Value of business acquired
614 
676 
Goodwill and other intangible assets
4,975 
4,799 
Prepaid reinsurance premiums
1,617 
1,541 
Deferred tax assets
453 
673 
Investments in partially-owned insurance companies (cost - $451 and $345)
454 
352 
Other assets
2,871 
2,495 
Total assets
92,545 
87,321 
Liabilities
 
 
Unpaid losses and loss expenses
37,946 
37,477 
Unearned premiums
6,864 
6,334 
Future policy benefits
4,470 
4,274 
Insurance and reinsurance balances payable
3,472 
3,542 
Securities lending payable
1,795 
1,385 
Accounts payable, accrued expenses, and other liabilities
5,377 
4,898 
Income taxes payable
20 
159 
Short-term debt
1,401 
1,251 
Long-term debt
3,360 
3,360 
Trust preferred securities
309 
309 
Total liabilities
65,014 
62,989 
Shareholders' equity
 
 
Common Shares (CHF 28.89 and CHF 30.27 par value; 342,832,412 shares issued; 340,321,534 and 336,927,276 shares outstanding)
9,591 
10,095 
Common Shares in treasury (2,510,878 and 5,905,136 shares)
(159)
(327)
Additional paid-in capital
5,179 
5,326 
Retained earnings
10,033 
7,327 
Accumulated other comprehensive income (AOCI)
2,887 
1,911 
Total shareholders' equity
27,531 
24,332 
Total liabilities and shareholders' equity
$ 92,545 
$ 87,321 
Consolidated Balance Sheets (Parenthetical)
In Millions, except Share data, unless otherwise specified
Dec. 31, 2012
USD ($)
Dec. 31, 2012
CHF
Dec. 31, 2011
USD ($)
Dec. 31, 2011
CHF
Statement of Financial Position [Abstract]
 
 
 
 
Fixed maturities available for sale, at amortized cost
$ 44,666 
 
$ 40,450 
 
Fixed maturities available for sale, hybrid financial instruments
309 
 
357 
 
Fixed maturities held to maturity, at amortized cost
7,633 
 
8,605 
 
Equity securities, at cost
707 
 
671 
 
Other investments, cost
2,465 
 
2,112 
 
Investments in partially-owned insurance companies, cost
$ 451 
 
$ 345 
 
Common Shares, par value
 
 28.89 
 
 30.27 
Common Shares, shares issued
342,832,412 
342,832,412 
342,832,412 
342,832,412 
Common Shares, shares outstanding
340,321,534 
340,321,534 
336,927,276 
336,927,276 
Common Shares in treasury, shares
2,510,878 
2,510,878 
5,905,136 
5,905,136 
Consolidated Statements Of Operations and Comprehensive Income (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Revenues
 
 
 
Net premiums written
$ 16,075 
$ 15,372 
$ 13,708 
Change in unearned premiums
(398)
15 
(204)
Net premiums earned
15,677 
15,387 
13,504 
Net investment income
2,181 
2,242 
2,070 
Net realized gains (losses):
 
 
 
Other-than-temporary impairment (OTTI) losses gross
(38)
(65)
(128)
Portion of OTTI losses recognized in other comprehensive income (OCI)
1 
15 
69 
Net OTTI losses recognized in income
(37)
(50)
(59)
Net realized gains (losses) excluding OTTI losses
115 
(745)
491 
Total net realized gains (losses)
78 
(795)
432 
Total revenues
17,936 
16,834 
16,006 
Expenses
 
 
 
Losses and loss expenses
9,653 
9,520 
7,579 
Policy benefits
521 
401 
357 
Policy acquisition costs
2,446 
2,472 
2,345 
Administrative expenses
2,096 
2,068 
1,873 
Interest expense
250 
250 
224 
Other (income) expense
(6)
81 
(10)
Total expenses
14,960 
14,792 
12,368 
Income before income tax
2,976 
2,042 
3,638 
Income tax expense
270 
502 
553 
Net income (loss)
2,706 
1,540 
3,085 
Other comprehensive income (loss)
 
 
 
Unrealized appreciation
1,350 
646 
1,526 
Reclassification adjustment for net realized gains included in net income
(234)
(173)
(632)
Other comprehensive income (loss)
1,116 
473 
894 
Change in:
 
 
 
Cumulative translation adjustment
116 
(5)
(7)
Pension liability
(35)
8 
11 
Other comprehensive income, before income tax
1,197 
476 
898 
Income tax expense related to OCI items
(221)
(159)
(127)
Other comprehensive income (loss)
976 
317 
771 
Comprehensive income
$ 3,682 
$ 1,857 
$ 3,856 
Earnings per share
 
 
 
Basic earnings per share (US$ per share)
$ 7.96 
$ 4.55 
$ 9.08 
Diluted earnings per share (US$ per share)
$ 7.89 
$ 4.52 
$ 9.04 
Consolidated Statements Of Shareholders' Equity (USD $)
In Millions, unless otherwise specified
Total
Common Shares
Common Shares in Treasury
Additional Paid-in Capital
Retained Earnings
Deferred Compensation Obligation
Accumulated Other Comprehensive Income
Net unrealized appreciation on investments
Cumulative Translation Adjustment
Accumulated Defined Benefit Plans Adjustment [Member]
Common Shares Issued To Employee Trust
Balance - beginning of year at Dec. 31, 2009 (Scenario, Previously Reported)
 
 
 
 
$ 2,818 
 
 
 
 
 
 
Cumulative effect of adjustment resulting from adoption of new accounting guidance (Restatement Adjustment)
 
 
 
 
(116)
 
 
 
 
 
 
Balance - beginning of year at Dec. 31, 2009
 
10,503 
(3)
5,526 
2,702 
2 
 
657 
240 
(74)
(2)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
Net shares redeemed under employee share-based compensation plans
 
71 
 
(64)
 
 
 
 
 
 
 
Exercise of stock options
 
30 
 
23 
 
 
 
 
 
 
 
Dividends declared on Common Shares-par value reduction
 
(443)
 
 
 
 
 
 
 
 
 
Common shares repurchased
 
 
(303)
 
 
 
 
 
 
 
 
Common Shares issued in treasury, net of net shares redeemed under employee share-based compensation plans
 
 
(24)
 
 
 
 
 
 
 
 
Share-based compensation expense and other
 
 
 
139 
 
 
 
 
 
 
 
Tax (expense) benefit on share-based compensation expense
 
 
 
(1)
 
 
 
 
 
 
 
Net income
3,085 
 
 
 
3,085 
 
 
 
 
 
 
Funding of dividends declared from Additional paid-in capital
 
 
 
   
   
 
 
 
 
 
 
Dividends declared on Common Shares
 
 
 
 
   
 
 
 
 
 
 
Decrease to obligation
 
 
 
 
 
   
 
 
 
 
 
Change in year, net of income tax expense of $(198), $(157) and $(152)
 
 
 
 
 
 
 
742 
 
 
 
Change in year, net of income tax benefit (expense) of $(35), $1, and $29
 
 
 
 
 
 
 
 
22 
 
 
Change in year, net of income tax benefit of $12, $(3) and $(4)
 
 
 
 
 
 
 
 
 
7 
 
Movement In Common Shares Issued To Employee Trust
   
 
 
 
 
 
 
 
 
 
 
Balance - end of year at Dec. 31, 2010 (Scenario, Previously Reported)
 
 
 
 
   
 
 
 
 
 
 
Balance - end of year at Dec. 31, 2010
22,835 
10,161 
(330)
5,623 
5,787 
2 
1,594 
1,399 
262 
(67)
(2)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
Net shares redeemed under employee share-based compensation plans
 
   
 
(104)
 
 
 
 
 
 
 
Exercise of stock options
 
47 
 
16 
 
 
 
 
 
 
 
Dividends declared on Common Shares-par value reduction
 
(113)
 
 
 
 
 
 
 
 
 
Common shares repurchased
 
 
(132)
 
 
 
 
 
 
 
 
Common Shares issued in treasury, net of net shares redeemed under employee share-based compensation plans
 
 
135 
 
 
 
 
 
 
 
 
Share-based compensation expense and other
 
 
 
139 
 
 
 
 
 
 
 
Tax (expense) benefit on share-based compensation expense
 
 
 
6 
 
 
 
 
 
 
 
Net income
1,540 
 
 
 
1,540 
 
 
 
 
 
 
Funding of dividends declared from Additional paid-in capital
 
 
 
(354)
354 
 
 
 
 
 
 
Dividends declared on Common Shares
 
 
 
 
(354)
 
 
 
 
 
 
Decrease to obligation
 
 
 
 
 
(2)
 
 
 
 
 
Change in year, net of income tax expense of $(198), $(157) and $(152)
 
 
 
 
 
 
 
316 
 
 
 
Change in year, net of income tax benefit (expense) of $(35), $1, and $29
 
 
 
 
 
 
 
 
(4)
 
 
Change in year, net of income tax benefit of $12, $(3) and $(4)
 
 
 
 
 
 
 
 
 
5 
 
Movement In Common Shares Issued To Employee Trust
2 
 
 
 
 
 
 
 
 
 
 
Balance - end of year at Dec. 31, 2011 (Scenario, Previously Reported)
 
 
 
 
   
 
 
 
 
 
 
Balance - end of year at Dec. 31, 2011
24,332 
10,095 
(327)
5,326 
7,327 
   
1,911 
1,715 
258 
(62)
   
Cumulative effect of adjustment resulting from adoption of new accounting guidance (Restatement Adjustment)
 
 
 
 
   
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
Net shares redeemed under employee share-based compensation plans
 
   
 
(93)
 
 
 
 
 
 
 
Exercise of stock options
 
   
 
(7)
 
 
 
 
 
 
 
Dividends declared on Common Shares-par value reduction
 
(504)
 
 
 
 
 
 
 
 
 
Common shares repurchased
 
 
(7)
 
 
 
 
 
 
 
 
Common Shares issued in treasury, net of net shares redeemed under employee share-based compensation plans
 
 
175 
 
 
 
 
 
 
 
 
Share-based compensation expense and other
 
 
 
135 
 
 
 
 
 
 
 
Tax (expense) benefit on share-based compensation expense
 
 
 
18 
 
 
 
 
 
 
 
Net income
2,706 
 
 
 
2,706 
 
 
 
 
 
 
Funding of dividends declared from Additional paid-in capital
 
 
 
(200)
200 
 
 
 
 
 
 
Dividends declared on Common Shares
 
 
 
 
(200)
 
 
 
 
 
 
Decrease to obligation
 
 
 
 
 
   
 
 
 
 
 
Change in year, net of income tax expense of $(198), $(157) and $(152)
 
 
 
 
 
 
 
918 
 
 
 
Change in year, net of income tax benefit (expense) of $(35), $1, and $29
 
 
 
 
 
 
 
 
81 
 
 
Change in year, net of income tax benefit of $12, $(3) and $(4)
 
 
 
 
 
 
 
 
 
(23)
 
Movement In Common Shares Issued To Employee Trust
   
 
 
 
 
 
 
 
 
 
 
Balance - end of year at Dec. 31, 2012
$ 27,531 
$ 9,591 
$ (159)
$ 5,179 
$ 10,033 
    
$ 2,887 
$ 2,633 
$ 339 
$ (85)
    
Consolidated Statements Of Shareholders' Equity (Parenthetical) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Net unrealized appreciation on investments
 
 
 
Net unrealized appreciation on investments, Change in year, income tax (expense) benefit
$ (198)
$ (157)
$ (152)
Cumulative Translation Adjustment
 
 
 
Cumulative translation adjustment, Change in year, income tax(expense) benefit
(35)
1 
29 
Accumulated Defined Benefit Plans Adjustment [Member]
 
 
 
Pension liability adjustment, Change in year, income tax (expense) benefit
$ 12 
$ (3)
$ (4)
Consolidated Statements Of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Cash flows from operating activities
 
 
 
Net income
$ 2,706 
$ 1,540 
$ 3,085 
Adjustments to reconcile net income to net cash flows from operating activities
 
 
 
Net realized (gains) losses
(78)
795 
(432)
Amortization of premiums/discounts on fixed maturities
220 
152 
145 
Deferred income taxes
(7)
15 
110 
Unpaid losses and loss expenses
203 
43 
(360)
Unearned premiums
522 
9 
262 
Future policy benefits
158 
78 
48 
Insurance and reinsurance balances payable
(151)
216 
(172)
Accounts payable, accrued expenses, and other liabilities
(42)
39 
130 
Income taxes payable
(167)
39 
10 
Insurance and reinsurance balances receivable
335 
(217)
50 
Reinsurance recoverable on losses and loss expenses
372 
531 
626 
Reinsurance recoverable on policy benefits
52 
25 
49 
Deferred policy acquisition costs
(340)
(122)
(170)
Prepaid reinsurance premiums
(123)
(34)
(13)
Other
335 
361 
178 
Net cash flows from operating activities
3,995 
3,470 
3,546 
Cash flows from investing activities
 
 
 
Purchases of fixed maturities available for sale
(23,455)
(23,823)
(29,985)
Purchases of to be announced mortgage-backed securities
(389)
(755)
(1,271)
Purchases of fixed maturities held to maturity
(388)
(340)
(616)
Purchases of equity securities
(135)
(309)
(794)
Sales of fixed maturities available for sale
14,321 
17,176 
23,096 
Sales of to be announced mortgage-backed securities
448 
795 
1,183 
Sales of equity securities
119 
376 
774 
Maturities and redemptions of fixed maturities available for sale
5,523 
3,720 
3,660 
Maturities and redemptions of fixed maturities held to maturity
1,451 
1,279 
1,353 
Net derivative instruments settlements
(281)
(67)
(109)
Acquisition of subsidiaries (net of cash acquired of $8, $91 and $80)
(98)
(606)
(1,139)
Other
(555)
(482)
(333)
Net cash flows from (used for) investing activities
(3,439)
(3,036)
(4,181)
Cash flows from financing activities
 
 
 
Dividends paid on Common Shares
(815)
(459)
(435)
Common Shares repurchased
(11)
(195)
(235)
Proceeds from issuance of short-term debt
2,933 
5,238 
1,300 
Repayment of short-term debt
(2,783)
(5,288)
(159)
Proceeds from issuances of long-term debt
   
   
699 
Repayments of Long-term Debt
   
   
(500)
Proceeds from share-based compensation plans
126 
139 
62 
Net cash flows from (used for) financing activities
(550)
(565)
732 
Effect of foreign currency rate changes on cash and cash equivalents
(5)
(27)
6 
Net increase (decrease) in cash
1 
(158)
103 
Cash - beginning of period
614 
772 1 2
669 1
Cash - end of period
615 3 4
614 
772 1 2
Supplemental cash flow information
 
 
 
Taxes paid
438 
460 
434 
Interest paid
$ 240 
$ 234 
$ 204 
Consolidated Statements Of Cash Flows (Parenthetical) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Statement of Cash Flows [Abstract]
 
 
 
Acquisition of subsidiaries, cash acquired
$ 8 
$ 91 
$ 80 
Summary of significant accounting policies
Summary of significant accounting policies
Summary of significant accounting policies

a) Basis of presentation
ACE Limited is a holding company incorporated in Zurich, Switzerland. ACE Limited, through its various subsidiaries, provides a broad range of insurance and reinsurance products to insureds worldwide. ACE operates through the following business segments: Insurance – North American, Insurance – Overseas General, Global Reinsurance, and Life. Refer to Note 15 for additional information.

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

Effective January 1, 2012, we retrospectively adopted new accounting guidance for costs associated with acquiring or renewing insurance contracts. Prior year amounts contained in this report have been adjusted to reflect this adoption. Refer to Note 1 s) below for additional information.
  
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Amounts included in the consolidated financial statements reflect our best estimates and assumptions; actual amounts could differ materially from these estimates. ACE's principal estimates include:
•
unpaid loss and loss expense reserves, including long-tail asbestos and environmental (A&E) reserves;
•
future policy benefits reserves;
•
the valuation of value of business acquired (VOBA) and amortization of deferred policy acquisition costs and VOBA;
•
reinsurance recoverable, including a provision for uncollectible reinsurance;
•
the assessment of risk transfer for certain structured insurance and reinsurance contracts;
•
the valuation of the investment portfolio and assessment of OTTI;
•
the valuation of deferred tax assets;
•
the valuation of derivative instruments related to guaranteed living benefits (GLB); and
•
the valuation of goodwill.

b) Premiums
Premiums are generally recognized as written upon inception of the policy. For multi-year policies for which premiums written are payable in annual installments, only the current annual premium is included as written at policy inception due to the ability of the insured/reinsured to commute or cancel coverage within the term of the policy. The remaining annual premiums are included as written at each successive anniversary date within the multi-year term.

For property and casualty (P&C) insurance and reinsurance products, premiums written are primarily earned on a pro-rata basis over the terms of the policies to which they relate. Unearned premiums represent the portion of premiums written applicable to the unexpired portion of the policies in force. For retrospectively-rated policies, written premiums are adjusted to reflect expected ultimate premiums consistent with changes to reported losses, or other measures of exposure as stated in the policy, and earned over the coverage period of the policy. For retrospectively-rated multi-year policies, the amount of premiums recognized in the current period is computed, using a with-and-without method, as the difference between the ceding enterprise's total contract costs before and after the experience under the contract at the reporting date. Accordingly, for retrospectively-rated multi-year policies, additional premiums are generally written and earned when losses are incurred.

Mandatory reinstatement premiums assessed on reinsurance policies are earned in the period of the loss event that gave rise to the reinstatement premiums.  All remaining unearned premiums are recognized over the remaining coverage period. 

Premiums from long duration contracts such as certain traditional term life, whole life, endowment, and long duration personal accident and health (A&H) policies are generally recognized as revenue when due from policyholders. Traditional life policies include those contracts with fixed and guaranteed premiums and benefits. Benefits and expenses are matched with such income to result in the recognition of profit over the life of the contracts.

Retroactive loss portfolio transfer (LPT) contracts in which the insured loss events occurred prior to the inception of the contract are evaluated to determine whether they meet the established criteria for reinsurance accounting. If reinsurance accounting is appropriate, written premiums are fully earned and corresponding losses and loss expenses recognized at the inception of the contract. The contracts can cause significant variances in gross premiums written, net premiums written, net premiums earned, and net incurred losses in the years in which they are written. Reinsurance contracts sold not meeting the established criteria for reinsurance accounting are recorded using the deposit method as described below in Note 1 k).

Reinsurance premiums assumed are based on information provided by ceding companies supplemented by our own estimates of premium when we have not received ceding company reports. The information used in establishing these estimates is reviewed and adjustments are recorded in the period in which they are determined. These premiums are earned over the coverage terms of the related reinsurance contracts and range from one to three years.

c) Deferred policy acquisition costs and value of business acquired
Policy acquisition costs consist of commissions, premium taxes, and certain underwriting costs related directly to the successful acquisition of new or renewal insurance contracts. A VOBA intangible asset is established upon the acquisition of blocks of long duration contracts and represents the present value of estimated net cash flows for the contracts in force at the time of the acquisition. Acquisition costs and VOBA, collectively policy acquisition costs, are deferred and amortized. This amortization is recorded in Policy acquisition costs in the consolidated statements of operations. Policy acquisition costs on P&C contracts are generally amortized ratably over the period in which premiums are earned. Policy acquisition costs on traditional long-duration contracts are amortized over the estimated life of the contracts, generally in proportion to premium revenue recognized. For non-traditional long- duration contracts, we amortize policy acquisition costs over the expected life of the contracts in proportion to estimates of expected gross profits.  The effect of changes in estimates of expected gross profits is reflected in the period that the estimates are revised. Policy acquisition costs are reviewed to determine if they are recoverable from future income, including investment income. Unrecoverable costs are expensed in the period identified.

Advertising costs are expensed as incurred except for direct-response campaigns that qualify for cost deferral, principally related to A&H business produced by the Insurance – Overseas General segment, which are deferred and recognized as a component of policy acquisition costs. For individual direct-response marketing campaigns that we can demonstrate have specifically resulted in incremental sales to customers and such sales have probable future economic benefits, incremental costs directly related to the marketing campaigns are capitalized. Deferred marketing costs are reviewed regularly for recoverability from future income, including investment income, and amortized in proportion to premium revenue recognized, primarily over a ten-year period, the expected economic future benefit period. The expected future benefit period is evaluated periodically based on historical results and adjusted prospectively. The amount of deferred marketing costs reported in Deferred policy acquisition costs in the consolidated balance sheets was $274 million and $236 million at December 31, 2012 and 2011, respectively. The amortization expense for deferred marketing costs was $156 million, $128 million, and $115 million for the years ended December 31, 2012, 2011, and 2010, respectively.

d) Reinsurance
ACE assumes and cedes reinsurance with other insurance companies to provide greater diversification of business and minimize the net loss potential arising from large risks. Ceded reinsurance contracts do not relieve ACE of its primary obligation to its policyholders.

For both ceded and assumed reinsurance, risk transfer requirements must be met in order to account for a contract as reinsurance, principally resulting in the recognition of cash flows under the contract as premiums and losses. To meet risk transfer requirements, a reinsurance contract must include insurance risk, consisting of both underwriting and timing risk, and a reasonable possibility of a significant loss for the assuming entity. To assess risk transfer for certain contracts, ACE generally develops expected discounted cash flow analyses at contract inception. Deposit accounting is used for contracts that do not meet risk transfer requirements. Deposit accounting requires that consideration received or paid be recorded in the balance sheet as opposed to recording premiums written or losses incurred in the statement of operations. Non-refundable fees on deposit contracts are earned based on the terms of the contract. Refer to Note 1 k).

Reinsurance recoverable includes the balances due from reinsurance companies for paid and unpaid losses and loss expenses and policy benefits that will be recovered from reinsurers, based on contracts in force. The method for determining the reinsurance recoverable on unpaid losses and loss expenses incurred but not reported (IBNR) involves actuarial estimates consistent with those used to establish the associated liability for unpaid losses and loss expenses as well as a determination of ACE's ability to cede unpaid losses and loss expenses.

Reinsurance recoverable is presented net of a provision for uncollectible reinsurance determined based upon a review of the financial condition of reinsurers and other factors. The provision for uncollectible reinsurance is based on an estimate of the amount of the reinsurance recoverable balance that will ultimately be unrecoverable due to reinsurer insolvency, a contractual dispute, or any other reason. The valuation of this provision includes several judgments including certain aspects of the allocation of reinsurance recoverable on IBNR claims by reinsurer and a default analysis to estimate uncollectible reinsurance. The primary components of the default analysis are reinsurance recoverable balances by reinsurer, net of collateral, and default factors used to determine the portion of a reinsurer's balance deemed uncollectible. The definition of collateral for this purpose requires some judgment and is generally limited to assets held in an ACE-only beneficiary trust, letters of credit, and liabilities held with the same legal entity for which ACE believes there is a contractual right of offset. The determination of the default factor is principally based on the financial strength rating of the reinsurer. Default factors require considerable judgment and are determined using the current financial strength rating, or rating equivalent, of each reinsurer as well as other key considerations and assumptions. The more significant considerations include, but are not necessarily limited to, the following:
•
For reinsurers that maintain a financial strength rating from a major rating agency, and for which recoverable balances are considered representative of the larger population (i.e., default probabilities are consistent with similarly rated reinsurers and payment durations conform to averages), the financial rating is based on a published source and the default factor is based on published default statistics of a major rating agency applicable to the reinsurer's particular rating class. When a recoverable is expected to be paid in a brief period of time by a highly rated reinsurer, such as certain property catastrophe claims, a default factor may not be applied;
•
For balances recoverable from reinsurers that are both unrated by a major rating agency and for which management is unable to determine a credible rating equivalent based on a parent, affiliate, or peer company, we determine a rating equivalent based on an analysis of the reinsurer that considers an assessment of the creditworthiness of the particular entity, industry benchmarks, or other factors as considered appropriate. We then apply the applicable default factor for that rating class. For balances recoverable from unrated reinsurers for which the ceded reserve is below a certain threshold, we generally apply a default factor of 34 percent, consistent with published statistics of a major rating agency;
•
For balances recoverable from reinsurers that are either insolvent or under regulatory supervision, we establish a default factor and resulting provision for uncollectible reinsurance based on reinsurer-specific facts and circumstances. Upon initial notification of an insolvency, we generally recognize an expense for a substantial portion of all balances outstanding, net of collateral, through a combination of write-offs of recoverable balances and increases to the provision for uncollectible reinsurance. When regulatory action is taken on a reinsurer, we generally recognize a default factor by estimating an expected recovery on all balances outstanding, net of collateral. When sufficient credible information becomes available, we adjust the provision for uncollectible reinsurance by establishing a default factor pursuant to information received; and
•
For other recoverables, management determines the provision for uncollectible reinsurance based on the specific facts and circumstances.

The methods used to determine the reinsurance recoverable balance and related provision for uncollectible reinsurance are regularly reviewed and updated and any resulting adjustments are reflected in earnings in the period identified.

Prepaid reinsurance premiums represent the portion of premiums ceded to reinsurers applicable to the unexpired coverage terms of the reinsurance contracts in force.

The value of reinsurance business assumed of $32 million and $35 million at December 31, 2012 and 2011, respectively, included in Other assets in the accompanying consolidated balance sheets, represents the excess of estimated ultimate value of the liabilities assumed under retroactive reinsurance contracts over consideration received. The value of reinsurance business assumed is amortized and recorded to losses and loss expenses based on the payment pattern of the losses assumed and ranges between 7 and 40 years. The unamortized value is reviewed regularly to determine if it is recoverable based upon the terms of the contract, estimated losses and loss expenses, and anticipated investment income. Unrecoverable amounts are expensed in the period identified.

e) Investments
Fixed maturities are classified as either available for sale or held to maturity. The available for sale portfolio is reported at fair value. The held to maturity portfolio includes securities for which we have the ability and intent to hold to maturity or redemption and is reported at amortized cost. Equity securities are classified as available for sale and are recorded at fair value. Short-term investments comprise securities due to mature within one year of the date of purchase and are recorded at fair value which typically approximates cost. Short-term investments include certain cash and cash equivalents, which are part of investment portfolios under the management of external investment managers.

Other investments principally comprise life insurance policies, policy loans, trading securities, other direct equity investments, investment funds, and limited partnerships.

•
Life insurance policies are carried at policy cash surrender value.
•
Policy loans are carried at outstanding balance.
•
Trading securities are recorded on a trade date basis and carried at fair value. Unrealized gains and losses on trading securities are reflected in net income.
•
Other investments over which ACE can exercise significant influence are accounted for using the equity method.
•
All other investments over which ACE cannot exercise significant influence are carried at fair value with changes in fair value recognized through OCI. For these investments, investment income and realized gains are recognized as related distributions are received.
•
Partially-owned investment companies comprise entities in which we hold an ownership interest in excess of three percent. These investments as well as ACE's investments in investment funds where our ownership interest is in excess of three percent are accounted for under the equity method because ACE exerts significant influence. These investments apply investment company accounting to determine operating results, and ACE retains the investment company accounting in applying the equity method. This means that investment income, realized gains or losses, and unrealized gains or losses are included in the portion of equity earnings reflected in Other (income) expense.

Investments in partially-owned insurance companies primarily represent direct investments in which ACE has significant influence and, as such, meet the requirements for equity accounting. We report our share of the net income or loss of the partially-owned insurance companies in Other (income) expense. Investments in partially-owned insurance companies over which ACE does not exert significant influence are carried at fair value.

Realized gains or losses on sales of investments are determined on a first-in, first-out basis. Unrealized appreciation (depreciation) on investments is included as a separate component of AOCI in shareholders' equity. We regularly review our investments for OTTI. Refer to Note 3 for additional information.

With respect to securities where the decline in value is determined to be temporary and the security's value is not written down, a subsequent decision may be made to sell that security and realize a loss. Subsequent decisions on security sales are the result of changing or unforeseen facts and circumstances (i.e., arising from a large insured loss such as a catastrophe), deterioration of the creditworthiness of the issuer or its industry, or changes in regulatory requirements. We believe that subsequent decisions to sell such securities are consistent with the classification of the majority of the portfolio as available for sale.

We use derivative instruments including futures, options, swaps, and foreign currency forward contracts for the purpose of managing certain investment portfolio risks and exposures. Refer to Note 10 for additional information. Derivatives are reported at fair value and recorded in the accompanying consolidated balance sheets in Accounts payable, accrued expenses, and other liabilities with changes in fair value included in Net realized gains (losses) in the consolidated statements of operations. Collateral held by brokers equal to a percentage of the total value of open futures contracts is included in the investment portfolio.

Net investment income includes interest and dividend income and amortization of fixed maturity market premiums and discounts and is net of investment management and custody fees. For mortgage-backed securities, and any other holdings for which there is a prepayment risk, prepayment assumptions are evaluated and revised as necessary. Any adjustments required due to the resultant change in effective yields and maturities are recognized prospectively. Prepayment fees or call premiums that are only payable when a security is called prior to its maturity are earned when received and reflected in Net investment income. 

ACE participates in a securities lending program operated by a third party banking institution whereby certain assets are loaned to qualified borrowers and from which we earn an incremental return. Borrowers provide collateral, in the form of either cash or approved securities, of 102 percent of the fair value of the loaned securities.  Each security loan is deemed to be an overnight transaction.  Cash collateral is invested in a collateral pool which is managed by the banking institution.  The collateral pool is subject to written investment guidelines with key objectives which include the safeguard of principal and adequate liquidity to meet anticipated redemptions. The fair value of the loaned securities is monitored on a daily basis, with additional collateral obtained or refunded as the fair value of the loaned securities changes. The collateral is held by the third party banking institution, and the collateral can only be accessed in the event that the institution borrowing the securities is in default under the lending agreement. As a result of these restrictions, we consider our securities lending activities to be non-cash investing and financing activities. An indemnification agreement with the lending agent protects us in the event a borrower becomes insolvent or fails to return any of the securities on loan. The fair value of the securities on loan is included in fixed maturities and equity securities. The securities lending collateral is reported as a separate line in total assets with a related liability reflecting our obligation to return the collateral plus interest.

Similar to securities lending arrangements, securities sold under reverse repurchase agreements, whereby ACE sells securities and repurchases them at a future date for a predetermined price, are accounted for as collateralized investments and borrowings and are recorded at the contractual repurchase amounts plus accrued interest. Assets to be repurchased are the same, or substantially the same, as the assets transferred and the transferor, through right of substitution, maintains the right and ability to redeem the collateral on short notice. The fair value of the underlying securities is included in fixed maturities and equity securities. In contrast to securities lending programs, the use of cash received is not restricted. We report the obligation to return the cash as Short-term debt in the consolidated balance sheets.

Refer to Note 4 for a discussion on the determination of fair value for ACE's various investment securities.

f) Cash
Cash includes cash on hand and deposits with an original maturity of three months or less at time of purchase. Cash held by external money managers is included in Short-term investments.

We have agreements with a third party bank provider which implemented two international multi-currency notional cash pooling programs. In each program, participating ACE entities establish deposit accounts in different currencies with the bank provider and each day the credit or debit balances in every account are notionally translated into a single currency (U.S. dollars) and then notionally pooled. The bank extends overdraft credit to any participating ACE entity as needed, provided that the overall notionally-pooled balance of all accounts in each pool at the end of each day is at least zero. Actual cash balances are not physically converted and are not commingled between legal entities. Any overdraft balances incurred under this program by an ACE entity would be guaranteed by ACE Limited (up to $300 million in the aggregate). Our syndicated letter of credit facility allows for same day drawings to fund a net pool overdraft should participating ACE entities withdraw contributed funds from the pool.

g) Goodwill and other intangible assets
Goodwill represents the excess of the cost of acquisitions over the fair value of net assets acquired and is not amortized. Goodwill is assigned at acquisition to the applicable reporting unit of the acquired entities giving rise to the goodwill. Goodwill impairment tests are performed annually, or more frequently if circumstances indicate a possible impairment.  For goodwill impairment testing, we use a qualitative assessment to determine whether it is more likely than not (i.e., more than a 50 percent probability) that the fair value of a reporting unit is greater than its carrying amount. If our assessment indicates less than a 50 percent probability that fair value exceeds carrying value, we quantitatively estimate a reporting unit's fair value using a consistently applied combination of the following models: an earnings multiple, a book value multiple, a discounted cash flow, or an allocated market capitalization model. The earnings and book value models apply multiples of comparable publicly traded companies to forecasted earnings or book value of each reporting unit and consider current market transactions. The discounted cash flow model applies a discount to estimated cash flows including a terminal value calculation. The market capitalization model allocates market capitalization to each reporting unit. Where appropriate, we consider the impact of a control premium. Goodwill recorded in connection with investments in partially-owned insurance companies is recorded in Investments in partially-owned insurance companies and is also measured for impairment annually.

Indefinite lived intangible assets are not subject to amortization. Finite lived intangible assets are amortized over their useful lives, generally ranging from 4 to 20 years. The amortization of finite lived intangible assets is reported in Other (income) expense in the consolidated statements of operations. The carrying amounts of intangible assets are regularly reviewed for indicators of impairment. Impairment is recognized if the carrying amount is not recoverable from its undiscounted cash flows and is measured as the difference between the carrying amount and fair value.

h) Unpaid losses and loss expenses
A liability is established for the estimated unpaid losses and loss expenses under the terms of, and with respect to, ACE's policies and agreements. These amounts include provision for both reported claims (case reserves) and IBNR claims. The methods of determining such estimates and establishing the resulting liability are reviewed regularly and any adjustments are reflected in operations in the period in which they become known. Future developments may result in losses and loss expenses materially greater or less than recorded amounts.

Except for net loss and loss expense reserves of $58 million net of discount, held at December 31, 2012, representing certain structured settlements for which the timing and amount of future claim payments are reliably determinable and $47 million net of discount of certain reserves for unsettled claims that are discounted in statutory filings, ACE does not discount its P&C loss reserves. This compares with reserves of $59 million for certain structured settlements and $35 million of certain reserves for unsettled claims at December 31, 2011. Structured settlements represent contracts purchased from life insurance companies primarily to settle workers' compensation claims, where payments to the claimant by the life insurance company are expected to be made in the form of an annuity. ACE retains the liability to the claimant in the event that the life insurance company fails to pay. At December 31, 2012, the gross liability for the amount due to claimants was $640 million net of discount and reinsurance recoverables for amounts due from the life insurance companies was $582 million net of discount. For structured settlement contracts where payments are guaranteed regardless of claimant life expectancy, the amounts recoverable from the life insurance companies at December 31, 2012 are included in Other assets in the consolidated balance sheets, as they do not meet the requirements for reinsurance accounting.

Included in unpaid losses and loss expenses are liabilities for asbestos and environmental (A&E) claims and expenses. These unpaid losses and loss expenses are principally related to claims arising from remediation costs associated with hazardous waste sites and bodily-injury claims related to asbestos products and environmental hazards. The estimation of these liabilities is particularly sensitive to changes in the legal environment, including specific settlements that may be used as precedents to settle future claims. However, ACE does not anticipate future changes in laws and regulations in setting its A&E reserve levels.

Prior period development arises from changes to loss estimates recognized in the current year that relate to loss reserves first reported in previous calendar years and excludes the effect of losses from the development of earned premiums from previous accident years. With respect to crop business, prior to the December 2010 acquisition of Rain and Hail Insurance Service, Inc. (Rain and Hail), reports relating to the previous crop year(s) were normally received in subsequent calendar years and this typically resulted in adjustments to the previously reported premiums, losses and loss expenses, and profit share commission.  Following the acquisition, such information is available before the close of the calendar year.

For purposes of analysis and disclosure, management views prior period development to be changes in the nominal value of loss estimates from period to period, net of premium and profit commission adjustments on loss sensitive contracts. Prior period development excludes changes in loss estimates that do not arise from the emergence of claims, such as those related to uncollectible reinsurance, interest, unallocated loss adjustment expenses, or foreign currency. Accordingly, specific items excluded from prior period development include the following: gains/losses related to foreign currency remeasurement; losses recognized from the early termination or commutation of reinsurance agreements that principally relate to the time value of money; changes in the value of reinsurance business assumed reflected in losses incurred but principally related to the time value of money; and losses that arise from changes in estimates of earned premiums from prior accident years. Except for foreign currency remeasurement, which is disclosed separately, these items are included in current year losses.

i) Future policy benefits
The valuation of long duration contract reserves requires management to make estimates and assumptions regarding expenses, mortality, persistency, and investment yields. Such estimates are primarily based on historical experience and information provided by ceding companies and include a margin for adverse deviation. Interest rates used in calculating reserves range from less than 1.0 percent to 4.5 percent and less than 1.0 percent to 6.0 percent at December 31, 2012 and 2011, respectively. Actual results could differ materially from these estimates. Management monitors actual experience, and where circumstances warrant, will revise assumptions and the related reserve estimates. Revisions are recorded in the period they are determined.

Certain of our long duration contracts are supported by assets that do not qualify for separate account reporting under GAAP. These assets are classified as trading securities and reported in Other investments and the offsetting liabilities are reported in Future policy benefits in the consolidated balance sheets. Changes in the fair value of separate account assets that do not quality for separate account reporting under GAAP are reported in Other income (expense) and the offsetting movements in the liabilities are included in Policy benefits in the consolidated statements of operations.

j) Assumed reinsurance programs involving minimum benefit guarantees under annuity contracts
ACE reinsures various death and living benefit guarantees associated with variable annuities issued primarily in the United States and Japan. Each reinsurance treaty covers variable annuities written during a limited period, typically not exceeding two years. We generally receive a monthly premium during the accumulation phase of the covered annuities (in-force) based on a percentage of either the underlying accumulated account values or the underlying accumulated guaranteed values. Depending on an annuitant's age, the accumulation phase can last many years. To limit our exposure under these programs, all reinsurance treaties include aggregate claim limits and many include an aggregate deductible.

The guarantees which are payable on death, referred to as guaranteed minimum death benefits (GMDB), principally cover shortfalls between accumulated account value at the time of an annuitant's death and either i) an annuitant's total deposits; ii) an annuitant's total deposits plus a minimum annual return; or iii) the highest accumulated account value attained at any policy anniversary date. In addition, a death benefit may be based on a formula specified in the variable annuity contract that uses a percentage of the growth of the underlying contract value. Liabilities for GMDBs are based on cumulative assessments or premiums to date multiplied by a benefit ratio that is determined by estimating the present value of benefit payments and related adjustment expenses divided by the present value of cumulative assessment or expected premiums during the contract period.  

Under reinsurance programs covering GLBs, we assume the risk of guaranteed minimum income benefits (GMIB) and guaranteed minimum accumulation benefits (GMAB) associated with variable annuity contracts. The GMIB risk is triggered if, at the time the contract holder elects to convert the accumulated account value to a periodic payment stream (annuitize), the accumulated account value is not sufficient to provide a guaranteed minimum level of monthly income. The GMAB risk is triggered if, at contract maturity, the contract holder's account value is less than a guaranteed minimum value. Our GLB reinsurance product meets the definition of a derivative for accounting purposes and is carried at fair value with changes in fair value recognized in income and classified as described below. As the assuming entity, we are obligated to provide coverage until the earlier of the expiration of the underlying guaranteed benefit or the treaty expiration date. Premiums received under the reinsurance treaties are classified as premium. Expected losses allocated to premiums received are classified as policy benefits and valued similar to GMDB reinsurance. Other changes in fair value, principally arising from changes in expected losses allocated to expected future premiums, are classified as Net realized gains (losses). Fair value represents management's estimate of exit price and thus includes a risk margin. We may recognize a realized loss for other changes in fair value due to adverse changes in the capital markets (i.e., declining interest rates and/or declining equity markets) and changes in policyholder behavior (i.e., increased annuitization or decreased lapse rates) although we expect the business to be profitable. We believe this presentation provides the most meaningful disclosure of changes in the underlying risk within the GLB reinsurance programs for a given reporting period. Refer to Note 5 c) for additional information.

k) Deposit assets and liabilities
Deposit assets arise from ceded reinsurance contracts purchased that do not transfer significant underwriting or timing risk. Under deposit accounting, consideration received or paid, excluding non-refundable fees, is recorded as a deposit asset or liability in the balance sheet as opposed to recording premiums and losses in the statement of operations. Interest income on deposits, representing the consideration received or to be received in excess of cash payments related to the deposit contract, is earned based on an effective yield calculation. The calculation of the effective yield is based on the amount and timing of actual cash flows at the balance sheet date and the estimated amount and timing of future cash flows. The effective yield is recalculated periodically to reflect revised estimates of cash flows. When a change in the actual or estimated cash flows occurs, the resulting change to the carrying amount of the deposit asset is reported as income or expense. Deposit assets of $138 million and $133 million at December 31, 2012 and 2011, respectively, are reflected in Other assets in the consolidated balance sheets and the accretion of deposit assets related to interest pursuant to the effective yield calculation is reflected in Net investment income in the consolidated statements of operations.

Non-refundable fees are earned based on contract terms. Non-refundable fees paid but unearned are reflected in Other assets in the consolidated balance sheets and earned fees are reflected in Other (income) expense in the consolidated statements of operations.

Deposit liabilities include reinsurance deposit liabilities of $283 million and $318 million and contract holder deposit funds of $548 million and $345 million at December 31, 2012 and 2011, respectively. Deposit liabilities are reflected in Accounts payable, accrued expenses, and other liabilities in the consolidated balance sheets. The reinsurance deposit liabilities arise from contracts sold for which there is not a significant transfer of risk. At contract inception, the deposit liability equals net cash received. An accretion rate is established based on actuarial estimates whereby the deposit liability is increased to the estimated amount payable over the contract term. The deposit accretion rate is the rate of return required to fund expected future payment obligations. We periodically reassess the estimated ultimate liability and related expected rate of return. Changes to the amount of the deposit liability are generally reflected through Interest expense to reflect the cumulative effect of the period the contract has been in force, and by an adjustment to the future accretion rate of the liability over the remaining estimated contract term.

Contract holder deposit funds represent a liability for investment contracts sold that do not meet the definition of an insurance contract and are sold with a guaranteed rate of return. The liability equals accumulated policy account values, which consist of the deposit payments plus credited interest, less withdrawals and amounts assessed through the end of the period.

l) Foreign currency remeasurement and translation
The functional currency for each of our foreign operations is generally the currency of the local operating environment. Transactions in currencies other than a foreign operation's functional currency are remeasured into the functional currency and the resulting foreign exchange gains and losses are reflected in Net realized gains (losses) in the consolidated statements of operations. Functional currency assets and liabilities are translated into the reporting currency, U.S. dollars, using period end rates of exchange and the related translation adjustments are recorded as a separate component of AOCI. Functional statement of operations amounts expressed in functional currencies are translated using average exchange rates. Gains and losses resulting from foreign currency transactions are recorded in Net realized gains (losses) in the consolidated statements of operations.

m) Administrative expenses
Administrative expenses generally include all operating costs other than policy acquisition costs. The Insurance – North American segment manages and uses an in-house third-party claims administrator, ESIS Inc. (ESIS).  ESIS performs claims management and risk control services for domestic and international organizations that self-insure P&C exposures as well as internal P&C exposures.  The net operating results of ESIS are included within Administrative expenses in the consolidated statements of operations and were $23 million, $21 million, and $85 million for the years ended December 31, 2012, 2011, and 2010, respectively.

n) Income taxes
Income taxes have been recorded related to those operations subject to income taxes. Deferred tax assets and liabilities result from temporary differences between the amounts recorded in the consolidated financial statements and the tax basis of our assets and liabilities. Refer to Note 8 for additional information. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance against deferred tax assets is recorded if it is more likely than not that all, or some portion, of the benefits related to deferred tax assets will not be realized. The valuation allowance assessment considers tax planning strategies, where applicable.

We recognize uncertain tax positions deemed more likely than not of being sustained upon examination.  Recognized income tax positions are measured at the largest amount that is greater than 50 percent likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

o) Earnings per share
Basic earnings per share is calculated using the weighted-average shares outstanding including participating securities with non-forfeitable rights to dividends such as unvested restricted stock. All potentially dilutive securities including stock options are excluded from the basic earnings per share calculation. In calculating diluted earnings per share, the weighted-average shares outstanding is increased to include all potentially dilutive securities. Basic and diluted earnings per share are calculated by dividing net income available to common shareholders by the applicable weighted-average number of shares outstanding during the year.

p) Cash flow information
Premiums received and losses paid associated with the GLB reinsurance products, which as discussed previously meet the definition of a derivative instrument for accounting purposes, are included within cash flows from operating activities in the consolidated statement of cash flows.  Cash flows, such as settlements and collateral requirements, associated with GLB and all other derivative instruments are included on a net basis within cash flows from investing activities in the consolidated statement of cash flows. Purchases, sales, and maturities of short-term investments are recorded net for purposes of the consolidated statements of cash flows and are classified with cash flows related to fixed maturities.

q) Derivatives
ACE recognizes all derivatives at fair value in the consolidated balance sheets and participates in derivative instruments in two principal ways:

(i) To sell protection to customers as an insurance or reinsurance contract that meets the definition of a derivative for accounting purposes. For 2012 and 2011, the reinsurance of GLBs was our primary product falling into this category; and
(ii) To mitigate financial risks, principally arising from investment holdings, products sold, or assets and liabilities held in foreign currencies. For these instruments, changes in assets or liabilities measured at fair value are recorded as realized gains or losses in the consolidated statement of operations.

We did not designate any derivatives as accounting hedges during 2012, 2011, or 2010.

r) Share-based compensation
ACE measures and records compensation cost for all share-based payment awards at grant-date fair value. Compensation costs are recognized for share-based payment awards with only service conditions that have graded vesting schedules on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards. Refer to Note 12 for additional information.

s) New accounting pronouncements
Adopted in 2012
Accounting for costs associated with acquiring or renewing insurance contracts
In October 2010, the Financial Accounting Standards Board (FASB) issued new guidance related to the accounting for costs associated with acquiring or renewing insurance contracts. Under the new guidance, the definition of acquisition costs was modified to specify that a cost must be directly related to the successful acquisition of a new or renewal insurance contract in order to be deferred. We adopted this guidance retrospectively effective January 1, 2012 and reduced Retained earnings as of January 1, 2010 by $116 million which represents the cumulative effect of adjustment resulting from adoption of new accounting guidance. We adjusted prior year amounts contained in this report to reflect the effect of adjustment from adoption of new accounting guidance including reducing Deferred policy acquisition costs and Retained earnings by $213 million and $181 million, respectively, as of December 31, 2011. The reduction to Deferred policy acquisition costs is primarily due to lower deferrals associated with unsuccessful efforts. We also reduced Net income by $45 million, or $0.13 per share, and $23 million, or $0.07 per share, for the years ended December 31, 2011 and 2010, respectively.

Fair value measurements
In May 2011, the FASB issued new guidance on fair value measurements to revise the wording used to describe the requirements for measuring fair value and for disclosing information about fair value measurements.  The guidance is not necessarily intended to result in a significant change in the application of the current requirements.  Instead, it is intended to clarify the application of existing fair value measurement requirements.  It also changes certain principles or requirements for measuring fair value and disclosing information about fair value measurements. We adopted this guidance prospectively effective January 1, 2012. The application of this guidance resulted in additional fair value measurements disclosures only and did not impact our financial condition or results of operations. 

Adopted in 2011
Testing goodwill for impairment
In September 2011, the FASB issued new accounting guidance which eliminates the requirement to calculate the fair value of reporting units at least annually and replaces it with an optional qualitative assessment. This guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted.  We adopted this guidance on October 1, 2011. The application of the new guidance resulted in a change in the procedures for assessing goodwill impairment, and did not impact our financial condition or results of operations.
Acquisitions
Acquisitions
Acquisitions

On June 13, 2012, we announced that we and our local partner had signed a definitive agreement to acquire PT Asuransi Jaya Proteksi (JaPro), one of Indonesia's leading general insurers. On September 18, 2012, we acquired 80 percent of JaPro and on January 3, 2013 our local partner acquired the remaining 20 percent. The total purchase price for 100 percent of the company was approximately $107 million in cash. The information needed to complete the purchase price allocation is preliminary and will be adjusted as further information becomes available during the measurement period. JaPro operates in our Insurance – Overseas General segment.

On September 12, 2012, we announced that we reached a definitive agreement to acquire Fianzas Monterrey, a leading surety lines company in Mexico offering administrative performance bonds primarily to clients in the construction and industrial sectors, for approximately $285 million in cash. This transaction, which is subject to regulatory approvals and other customary closing conditions, is expected to be completed in the first half of 2013.

On October 18, 2012, we announced that we reached a definitive agreement to acquire ABA Seguros, a property and casualty insurer in Mexico that provides automobile, homeowners, and small business coverages. We expect to pay approximately $865 million in cash for this transaction, subject to adjustment for dividends paid between signing and closing. This transaction, which is subject to regulatory approvals and other customary closing conditions, is expected to be completed in the first half of 2013.
Prior year acquisitions
We acquired New York Life’s Korea operations on February 1, 2011 and New York Life’s Hong Kong operations on April 1, 2011 for approximately $450 million in cash. These acquired businesses operate in our Life segment, expand our presence in the North Asia market and complement our life insurance business established in that region. In 2012, we finalized purchase price allocations resulting in $91 million of goodwill, none of which is expected to be deductible for income tax purposes, and $163 million of intangible assets. The most significant intangible asset is VOBA.
We acquired Penn Millers Holding Corporation (PMHC) on November 30, 2011 for approximately $107 million in cash. PMHC’s primary insurance subsidiary, Penn Millers Insurance Company (Penn Millers), is a well-established underwriter in the agribusiness market since 1887. PMHC operates in our Insurance – North American segment.
We acquired Rio Guayas Compania de Seguros y Reaseguros (Rio Guayas), a general insurance company in Ecuador on December 28, 2011 for approximately $65 million in cash. Rio Guayas sells a range of insurance products, including automobile, life, property, and A&H. The acquisition of Rio Guayas expands our capabilities in terms of geography, products, and distribution. Rio Guayas operates in our Insurance – Overseas General segment.

On December 28, 2010, we acquired all the outstanding common stock of Rain and Hail Insurance Service, Inc. (Rain and Hail) not previously owned by us for approximately $1.1 billion in cash. Rain and Hail has served America's farmers since 1919, providing comprehensive multiple peril crop and crop-hail insurance protection to customers in the U.S. and Canada. This acquisition is consistent with our strategy to expand our specialty lines business and provides further diversification of our global product mix.

Prior to the consummation of this business combination, our 20.1 percent ownership in Rain and Hail was recorded in Investments in partially-owned insurance companies in the consolidated balance sheets. In accordance with GAAP, at the date of the business combination, we were deemed to have disposed of our 20.1 percent ownership interest and recognized 100 percent of the assets and liabilities of Rain and Hail at acquisition date fair value. In connection with this deemed disposition, we recognized a $175 million gain in Net realized gains (losses) in the consolidated statement of operations, which represents the excess of acquisition date fair value of the 20.1 percent ownership interest over the cost basis. Acquisition date fair value of the 20.1 percent ownership interest was determined by first calculating the implied fair value of 100 percent of Rain and Hail based on the purchase price for the net assets not previously owned by us at the acquisition date. The implied fair value of the 20.1 percent ownership interest was then reduced to reflect a noncontrolling interest discount. The acquisition generated $123 million of goodwill, none of which is expected to be deductible for income tax purposes, and $523 million of other intangible assets based on our purchase price allocation. Goodwill and other intangible assets arising from this acquisition are included in our Insurance – North American segment. Legal and other expenses incurred to complete the acquisition amounted to $2 million and are included in Other (income) expense.

On December 1, 2010, we acquired Jerneh Insurance Berhad (Jerneh), a general insurance company in Malaysia, for approximately $218 million in cash. The acquisitions of Rain and Hail and Jerneh were financed with cash on hand and the use of reverse repurchase agreements of $1 billion.

The consolidated financial statements include the results of these acquired businesses from the date of acquisition.
Investments
Investments
Investments

a) Fixed maturities
The following tables present the amortized cost and fair value of fixed maturities and related OTTI recognized in AOCI:
December 31, 2012
Amortized
Cost

 
Gross
Unrealized
Appreciation

 
Gross
Unrealized
Depreciation

 
Fair
Value

 
OTTI Recognized
in AOCI

(in millions of U.S. dollars)
 
 
 
 
Available for sale
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency
$
3,553

 
$
183

 
$
(1
)
 
$
3,735

 
$
—

Foreign
13,016

 
711

 
(14
)
 
13,713

 
—

Corporate securities
15,529

 
1,210

 
(31
)
 
16,708

 
(7
)
Mortgage-backed securities
10,051

 
458

 
(36
)
 
10,473

 
(84
)
States, municipalities, and political subdivisions
2,517

 
163

 
(3
)
 
2,677

 
—

 
$
44,666

 
$
2,725

 
$
(85
)
 
$
47,306

 
$
(91
)
Held to maturity
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency
$
1,044

 
$
39

 
$
—

 
$
1,083

 
$
—

Foreign
910

 
54

 
—

 
964

 
—

Corporate securities
2,133

 
142

 
—

 
2,275

 
—

Mortgage-backed securities
2,028

 
88

 
—

 
2,116

 
—

States, municipalities, and political subdivisions
1,155

 
44

 
(4
)
 
1,195

 
—

 
$
7,270

 
$
367

 
$
(4
)
 
$
7,633

 
$
—

 
 
 
 
 
 
 
 
 
 
December 31, 2011
Amortized
Cost

 
Gross
Unrealized
Appreciation

 
Gross
Unrealized
Depreciation

 
Fair
Value

 
OTTI Recognized
in AOCI

(in millions of U.S. dollars)
 
 
 
 
Available for sale
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency
$
2,774

 
$
186

 
$
—

 
$
2,960

 
$
—

Foreign
12,025

 
475

 
(99
)
 
12,401

 
(2
)
Corporate securities
14,055

 
773

 
(135
)
 
14,693

 
(22
)
Mortgage-backed securities
9,979

 
397

 
(175
)
 
10,201

 
(151
)
States, municipalities, and political subdivisions
1,617

 
96

 
(1
)
 
1,712

 
—

 
$
40,450

 
$
1,927

 
$
(410
)
 
$
41,967

 
$
(175
)
Held to maturity
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency
$
1,078

 
$
48

 
$
—

 
$
1,126

 
$
—

Foreign
935

 
18

 
(23
)
 
930

 
—

Corporate securities
2,338

 
44

 
(45
)
 
2,337

 
—

Mortgage-backed securities
2,949

 
90

 
(3
)
 
3,036

 
—

States, municipalities, and political subdivisions
1,147

 
32

 
(3
)
 
1,176

 
—

 
$
8,447

 
$
232

 
$
(74
)
 
$
8,605

 
$
—


 
As discussed in Note 3 d), if a credit loss is indicated on an impaired fixed maturity, an OTTI is considered to have occurred and the portion of the impairment not related to credit losses (non-credit OTTI) is recognized in OCI. Included in the “OTTI Recognized in AOCI” columns above are the cumulative amounts of non-credit OTTI recognized in OCI adjusted for subsequent sales, maturities, and redemptions. OTTI Recognized in AOCI does not include the impact of subsequent changes in fair value of the related securities. In periods subsequent to a recognition of OTTI in OCI, changes in the fair value of the related fixed maturities are reflected in Unrealized appreciation (depreciation) in the consolidated statement of shareholders' equity. For the years ended December 31, 2012 and 2011, $137 million of net unrealized appreciation and $48 million of net unrealized depreciation, respectively, related to such securities is included in OCI. At December 31, 2012 and 2011, AOCI includes net unrealized depreciation of $25 million and $155 million, respectively, related to securities remaining in the investment portfolio at those dates for which ACE has recognized a non-credit OTTI.
Mortgage-backed securities (MBS) issued by U.S. government agencies are combined with all other to be announced mortgage derivatives held (refer to Note 10 a) (iv)) and are included in the category, “Mortgage-backed securities”. Approximately 85 percent and 84 percent of the total mortgage-backed securities at December 31, 2012 and December 31, 2011, respectively, are represented by investments in U.S. government agency bonds. The remainder of the mortgage exposure consists of collateralized mortgage obligations and non-government mortgage-backed securities, the majority of which provide a planned structure for principal and interest payments and carry a rating of AAA by the major credit rating agencies.
The following table presents fixed maturities by contractual maturity: 
 
December 31
 
 
December 31
 
 
 
 
2012

 
 
 
2011

(in millions of U.S. dollars)
Amortized Cost

 
Fair Value

 
Amortized Cost

 
Fair Value

Available for sale
 
 
 
 
 
 
 
Due in 1 year or less
$
1,887

 
$
1,906

 
$
2,321

 
$
2,349

Due after 1 year through 5 years
13,411

 
14,010

 
12,325

 
12,722

Due after 5 years through 10 years
15,032

 
16,153

 
12,379

 
12,995

Due after 10 years
4,285

 
4,764

 
3,446

 
3,700

 
34,615

 
36,833

 
30,471

 
31,766

Mortgage-backed securities
10,051

 
10,473

 
9,979

 
10,201

 
$
44,666

 
$
47,306

 
$
40,450

 
$
41,967

Held to maturity
 
 
 
 
 
 
 
Due in 1 year or less
$
656

 
$
659

 
$
393

 
$
396

Due after 1 year through 5 years
1,870

 
1,950

 
2,062

 
2,090

Due after 5 years through 10 years
2,119

 
2,267

 
2,376

 
2,399

Due after 10 years
597

 
641

 
667

 
684

 
5,242

 
5,517

 
5,498

 
5,569

Mortgage-backed securities
2,028

 
2,116

 
2,949

 
3,036

 
$
7,270

 
$
7,633

 
$
8,447

 
$
8,605


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

b) Equity securities
The following table presents the cost and fair value of equity securities:
 
December 31


December 31

(in millions of U.S. dollars)
2012


2011

Cost
$
707

 
$
671

Gross unrealized appreciation
41

 
18

Gross unrealized depreciation
(4
)
 
(42
)
Fair value
$
744

 
$
647


c) Net realized gains (losses)
In accordance with guidance related to the recognition and presentation of OTTI, when an impairment related to a fixed maturity has occurred, OTTI is required to be recorded in net income if management has the intent to sell the security or it is more likely than not that we will be required to sell the security before the recovery of its amortized cost. Further, in cases where we do not intend to sell the security and it is more likely than not that we will not be required to sell the security, ACE must evaluate the security to determine the portion of the impairment, if any, related to credit losses. If a credit loss is indicated, an OTTI is considered to have occurred and any portion of the OTTI related to credit losses must be reflected in net income while the portion of OTTI related to all other factors is recognized in OCI. For fixed maturities held to maturity, OTTI recognized in OCI is accreted from AOCI to the amortized cost of the fixed maturity prospectively over the remaining term of the securities.
Each quarter, securities in an unrealized loss position (impaired securities), including fixed maturities, securities lending collateral, equity securities, and other investments, are reviewed to identify impaired securities to be specifically evaluated for a potential OTTI.
For all non-fixed maturities, OTTI is evaluated based on the following:
•
the amount of time a security has been in a loss position and the magnitude of the loss position;
•
the period in which cost is expected to be recovered, if at all, based on various criteria including economic conditions and other issuer-specific developments; and
•
ACE’s ability and intent to hold the security to the expected recovery period.
As a general rule, we also consider that equity securities in an unrealized loss position for twelve consecutive months are other than temporarily impaired.

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

U.S. Treasury and agency obligations (including agency mortgage-backed securities), foreign government obligations, and states, municipalities, and political subdivisions obligations
U.S. Treasury and agency obligations (including agency mortgage-backed securities), foreign government obligations, and states, municipalities, and political subdivisions obligations represent less than $18 million of gross unrealized loss at December 31, 2012. These securities were evaluated for credit loss primarily using qualitative assessments of the likelihood of credit loss considering credit rating of the issuers and level of credit enhancement, if any. ACE concluded that the high level of creditworthiness of the issuers coupled with credit enhancement, where applicable, supports recognizing no credit loss in net income.

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

The following table presents default assumptions by Moody's rating category (historical mean default rate provided for comparison):
Moody's Rating Category
1-in-100 Year Default Rate

 
Historical Mean Default Rate

Investment Grade:
 
 
 
Aaa-Baa
0.0-1.4%

 
0.0-0.3%

Below Investment Grade:
 
 
 
Ba
4.9
%
 
1.1
%
B
12.8
%
 
3.4
%
Caa-C
53.4
%
 
13.8
%


Consistent with management's approach to developing default rate assumptions considering recent market conditions, ACE assumed a 32 percent recovery rate (the par value of a defaulted security that will be recovered) across all rating categories rather than using Moody's historical mean recovery rate of 42 percent. ACE believes that use of a recovery rate assumption lower than the historical mean is reasonable in light of recent market conditions.
Application of the methodology and assumptions described above resulted in credit losses recognized in net income for corporate securities of $14 million, $9 million, and $14 million for the years ended December 31, 2012, 2011, and 2010, respectively.

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

ACE develops specific assumptions using market data, where available, and includes internal estimates as well as estimates published by rating agencies and other third-party sources. ACE projects default rates by mortgage sector considering current underlying mortgage loan performance, generally assuming lower loss severity for Prime sector bonds versus ALT-A and Sub-prime bonds.

These estimates are extrapolated along a default timing curve to estimate the total lifetime pool default rate. Other assumptions used contemplate the actual collateral attributes, including geographic concentrations, rating agency loss projections, rating actions, and current market prices. If cash flow projections indicate that losses will exceed the credit enhancement for a given tranche, then we do not expect to recover our amortized cost basis and we recognize an estimated credit loss in net income.

Application of the methodology and assumptions described above resulted in credit losses recognized in net income for mortgage-backed securities of $6 million, $11 million, and $32 million for the years ended December 31, 2012, 2011, and 2010, respectively.
The following table presents the Net realized gains (losses) and the losses included in Net realized gains (losses) and OCI as a result of conditions which caused us to conclude the decline in fair value of certain investments was “other-than-temporary” and the change in net unrealized appreciation (depreciation) of investments: 
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

Fixed maturities:
 
 
 
 
 
OTTI on fixed maturities, gross
$
(26
)
 
$
(61
)
 
$
(115
)
OTTI on fixed maturities recognized in OCI (pre-tax)
1

 
15

 
69

OTTI on fixed maturities, net
(25
)
 
(46
)
 
(46
)
Gross realized gains excluding OTTI
388

 
410

 
569

Gross realized losses excluding OTTI
(133
)
 
(200
)
 
(143
)
Total fixed maturities
230

 
164

 
380

Equity securities:
 
 
 
 
 
OTTI on equity securities
(5
)
 
(1
)
 
—

Gross realized gains excluding OTTI
11

 
15

 
86

Gross realized losses excluding OTTI
(2
)
 
(5
)
 
(2
)
Total equity securities
4

 
9

 
84

OTTI on other investments
(7
)
 
(3
)
 
(13
)
Foreign exchange losses
(16
)
 
(13
)
 
(54
)
Investment and embedded derivative instruments
(6
)
 
(143
)
 
58

Fair value adjustments on insurance derivative
171

 
(779
)
 
(28
)
S&P put options and futures
(297
)
 
(4
)
 
(150
)
Other derivative instruments
(4
)
 
(4
)
 
(19
)
Other
3

 
(22
)
 
174

Net realized gains (losses)
78

 
(795
)
 
432

Change in net unrealized appreciation (depreciation) on investments:
 
 
 
 
 
Fixed maturities available for sale
1,099

 
569

 
451

Fixed maturities held to maturity
(94
)
 
(89
)
 
522

Equity securities
61

 
(47
)
 
(44
)
Other
50

 
40

 
(35
)
Income tax expense
(198
)
 
(157
)
 
(152
)
Change in net unrealized appreciation on investments
918

 
316

 
742

Total net realized gains (losses) and change in net unrealized appreciation (depreciation) on investments
$
996

 
$
(479
)
 
$
1,174


 
The following table presents a roll-forward of pre-tax credit losses related to fixed maturities for which a portion of OTTI was recognized in OCI: 
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

Balance of credit losses related to securities still held – beginning of year
$
74

 
$
137

 
$
174

Additions where no OTTI was previously recorded
8

 
12

 
34

Additions where an OTTI was previously recorded
12

 
8

 
12

Reductions for securities sold during the period
(51
)
 
(83
)
 
(83
)
Balance of credit losses related to securities still held – end of year
$
43

 
$
74

 
$
137


d) Other investments
The following table presents the fair value and cost of other investments:
 
 
 
December 31

 
 
 
December 31

 
 
 
2012

 
 
 
2011

(in millions of U.S. dollars)
Fair Value

 
Cost

 
Fair Value

 
Cost

Investment funds
$
395

 
$
278

 
$
378

 
$
277

Limited partnerships
531

 
398

 
531

 
429

Partially-owned investment companies
1,186

 
1,187

 
904

 
904

Life insurance policies
148

 
148

 
127

 
127

Policy loans
164

 
164

 
143

 
143

Trading securities
243

 
242

 
194

 
195

Other
49

 
48

 
37

 
37

Total
$
2,716

 
$
2,465

 
$
2,314

 
$
2,112



Investment funds include one highly diversified fund investment as well as several direct funds that employ a variety of investment styles such as long/short equity and arbitrage/distressed. Included in limited partnerships and partially-owned investment companies are 65 individual limited partnerships covering a broad range of investment strategies including large cap buyouts, specialist buyouts, growth capital, distressed, mezzanine, real estate, and co-investments. The underlying portfolio consists of various public and private debt and equity securities of publicly traded and privately held companies and real estate assets.  The underlying investments across various partnerships, geographies, industries, asset types, and investment strategies provide risk diversification within the limited partnership portfolio and the overall investment portfolio.  Trading securities comprise $212 million of mutual funds supported by assets that do not quality for separate account reporting under GAAP at December 31, 2012 compared with $162 million at December 31, 2011. Trading securities also includes assets held in rabbi trusts of $23 million of equity securities and $8 million of fixed maturities at December 31, 2012, compared with $24 million of equity securities and $8 million of fixed maturities at December 31, 2011.

e) Investments in partially-owned insurance companies
The following table presents Investments in partially-owned insurance companies:
 
December 31
 
 
December 31
 
 
 
 
2012
 
 
2011
 
 
 
(in millions of U.S. dollars, except percentages)
Carrying Value

 
Issued Share Capital

 
Ownership Percentage

 
Carrying Value

 
Issued Share Capital

 
Ownership Percentage

 
Domicile
Huatai Group
$
350

(1) 
$
474

 
20.0
%
 
$
228

 
$
457

 
20.0
%
 
China
Huatai Life Insurance Company
84

 
205

 
20.0
%
 
103

 
196

 
20.0
%
 
China
Freisenbruch-Meyer
9

 
6

 
40.0
%
 
8

 
5

 
40.0
%
 
Bermuda
ACE Cooperative Ins. Co. - Saudi Arabia
9

 
27

 
30.0
%
 
7

 
27

 
30.0
%
 
Saudi Arabia
Russian Reinsurance Company
2

 
4

 
23.3
%
 
2

 
4

 
23.3
%
 
Russia
Island Heritage
—

 
—

 
—

 
4

 
27

 
10.8
%
 
Cayman Islands
Total
$
454

 
$
716

 
 
 
$
352

 
$
716

 
 
 
 

(1) 
Includes additional investment of approximately $100 million which is pending regulatory approval.
Huatai Group and Huatai Life Insurance Company provide a range of P&C, life, and investment products.

f) Gross unrealized loss
At December 31, 2012, there were 2,029 fixed maturities out of a total of 23,679 fixed maturities in an unrealized loss position. The largest single unrealized loss in the fixed maturities was $5 million. There were 56 equity securities out of a total of 193 equity securities in an unrealized loss position. The largest single unrealized loss in the equity securities was $1 million. Fixed maturities in an unrealized loss position at December 31, 2012 comprised both investment grade and below investment grade securities for which fair value declined primarily due to widening credit spreads since the date of purchase.

The following tables present, for all securities in an unrealized loss position (including securities on loan), the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:
 
0 – 12 Months
 
 
Over 12 Months
 
 
Total
 
December 31, 2012
Fair Value

 
Gross
Unrealized Loss

 
Fair Value

 
Gross
Unrealized Loss

 
Fair Value

 
Gross
Unrealized Loss

(in millions of U.S. dollars)
 
 
 
 
 
U.S. Treasury and agency
$
440

 
$
(1.4
)
 
$
—

 
$
—

 
$
440

 
$
(1.4
)
Foreign
1,234

 
(8.6
)
 
88

 
(5.8
)
 
1,322

 
(14.4
)
Corporate securities
1,026

 
(22.7
)
 
85

 
(7.9
)
 
1,111

 
(30.6
)
Mortgage-backed securities
855

 
(3.8
)
 
356

 
(32.6
)
 
1,211

 
(36.4
)
States, municipalities, and political subdivisions
316

 
(3.0
)
 
48

 
(3.6
)
 
364

 
(6.6
)
Total fixed maturities
3,871

 
(39.5
)
 
577

 
(49.9
)
 
4,448

 
(89.4
)
Equity securities
29

 
(4.2
)
 
—

 
—

 
29

 
(4.2
)
Other investments
68

 
(4.9
)
 
—

 
—

 
68

 
(4.9
)
Total
$
3,968

 
$
(48.6
)
 
$
577

 
$
(49.9
)
 
$
4,545

 
$
(98.5
)
 
 
0 – 12 Months
 
 
Over 12 Months
 
 
Total
 
December 31, 2011
Fair Value

 
Gross
Unrealized Loss

 
Fair Value

 
Gross
Unrealized Loss

 
Fair Value

 
Gross
Unrealized Loss

(in millions of U.S. dollars)
 
 
 
 
 
Foreign
$
1,801

 
$
(82.2
)
 
$
529

 
$
(40.0
)
 
$
2,330

 
$
(122.2
)
Corporate securities
3,084

 
(148.2
)
 
268

 
(32.2
)
 
3,352

 
(180.4
)
Mortgage-backed securities
440

 
(7.5
)
 
586

 
(170.2
)
 
1,026

 
(177.7
)
States, municipalities, and political subdivisions
30

 
(0.4
)
 
98

 
(3.5
)
 
128

 
(3.9
)
Total fixed maturities
5,355

 
(238.3
)
 
1,481

 
(245.9
)
 
6,836

 
(484.2
)
Equity securities
484

 
(42.3
)
 
—

 
—

 
484

 
(42.3
)
Other investments
88

 
(8.3
)
 
—

 
—

 
88

 
(8.3
)
Total
$
5,927

 
$
(288.9
)
 
$
1,481

 
$
(245.9
)
 
$
7,408

 
$
(534.8
)

g) Net investment income
The following table presents the sources of net investment income:
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

Fixed maturities
$
2,134

 
$
2,196

 
$
2,071

Short-term investments
28

 
43

 
34

Equity securities
34

 
36

 
26

Other
104

 
62

 
44

Gross investment income
2,300

 
2,337

 
2,175

Investment expenses
(119
)
 
(95
)
 
(105
)
Net investment income
$
2,181

 
$
2,242

 
$
2,070


h) Restricted assets
ACE is required to maintain assets on deposit with various regulatory authorities to support its insurance and reinsurance operations. These requirements are generally promulgated in the statutory regulations of the individual jurisdictions. The assets on deposit are available to settle insurance and reinsurance liabilities. ACE is also required to restrict assets pledged under reverse repurchase agreements. We also use trust funds in certain large reinsurance transactions where the trust funds are set up for the benefit of the ceding companies and generally take the place of letter of credit (LOC) requirements. We also have investments in segregated portfolios primarily to provide collateral or guarantees for LOCs and derivative transactions. Included in restricted assets at December 31, 2012 and 2011, are fixed maturities and short-term investments totaling $16.6 billion and $14.9 billion, respectively, and cash of $139 million and $179 million, respectively.
The following table presents the components of restricted assets: 
 
December 31

 
December 31

(in millions of U.S. dollars)
2012

 
2011

Trust funds
$
11,389

 
$
9,940

Deposits with non-U.S. regulatory authorities
2,133

 
2,240

Assets pledged under reverse repurchase agreements
1,401

 
1,251

Deposits with U.S. regulatory authorities
1,338

 
1,307

Other pledged assets
456

 
364

 
$
16,717

 
$
15,102

Fair value measurements
Fair value measurements
Fair value measurements
a) Fair value hierarchy
Fair value of financial assets and financial liabilities is estimated based on the framework established in the fair value accounting guidance. The guidance defines fair value as the price to sell an asset or transfer a liability in an orderly transaction between market participants and establishes a three-level valuation hierarchy in which inputs into valuation techniques used to measure fair value are classified. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data.
 
The three levels of the hierarchy are as follows:
•
Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets;
•
Level 2 – Includes, among other items, inputs other than quoted prices that are observable for the asset or liability such as interest rates and yield curves, quoted prices for similar assets and liabilities in active markets, and quoted prices for identical or similar assets and liabilities in markets that are not active; and
•
Level 3 – Inputs that are unobservable and reflect management’s judgments about assumptions that market participants would use in pricing an asset or liability.
We categorize financial instruments within the valuation hierarchy at the balance sheet date based upon the lowest level of inputs that are significant to the fair value measurement. Accordingly, transfers between levels within the valuation hierarchy occur when there are significant changes to the inputs, such as increases or decreases in market activity, changes to the availability of current prices, changes to the transparency to underlying inputs, and whether there are significant variances in quoted prices. Transfers in and/or out of any level are assumed to occur at the end of the period.

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

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

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


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

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

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

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

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

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

Guaranteed living benefits
The GLB arises from life reinsurance programs covering living benefit guarantees whereby we assume the risk of guaranteed minimum income benefits (GMIB) and guaranteed minimum accumulation benefits (GMAB) associated with variable annuity contracts. GLB’s are recorded in Accounts payable, accrued expenses, and other liabilities and Future policy benefits in the consolidated balance sheets. For GLB reinsurance, ACE estimates fair value using an internal valuation model which includes current market information and estimates of policyholder behavior. All of the treaties contain claim limits, which are factored into the valuation model. The fair value depends on a number of inputs, including changes in interest rates, changes in equity markets, credit risk, current account value, changes in market volatility, expected annuitization rates, changes in policyholder behavior, and changes in policyholder mortality.
The most significant policyholder behavior assumptions include lapse rates and the GMIB annuitization rates. Assumptions regarding lapse rates and GMIB annuitization rates differ by treaty but the underlying methodologies to determine rates applied to each treaty are comparable. The assumptions regarding lapse and GMIB annuitization rates determined for each treaty are based on a dynamic calculation that uses several underlying factors.
A lapse rate is the percentage of in-force policies surrendered in a given calendar year. All else equal, as lapse rates increase, ultimate claim payments will decrease. In general, the base lapse function assumes low lapse rates (ranging from about 1 percent to 6 percent per annum) during the surrender charge period of the GMIB contract, followed by a “spike” lapse rate (ranging from about 10 percent to 30 percent per annum) in the year immediately following the surrender charge period, and then reverting to an ultimate lapse rate (generally around 10 percent per annum), typically over a 2-year period. This base rate is adjusted downward for policies with more valuable guarantees (policies with guaranteed values far in excess of their account values) by multiplying the base lapse rate by a factor ranging from 15 percent to 75 percent. Additional lapses due to partial withdrawals and older policyholders with tax-qualified contracts (due to required minimum distributions) are also included.
The GMIB annuitization rate is the percentage of policies for which the policyholder will elect to annuitize using the guaranteed benefit provided under the GMIB. All else equal, as GMIB annuitization rates increase, ultimate claim payments will increase, subject to treaty claim limits. In general ACE assumes that GMIB annuitization rates will be higher for policies with more valuable guarantees (policies with guaranteed values far in excess of their account values). In addition, we also assume that GMIB annuitization rates are higher in the first year immediately following the waiting period (the first year the policies are eligible to annuitize using the GMIB) in comparison to all subsequent years. We do not yet have a robust set of annuitization experience because most of our clients’ policyholders are not yet eligible to annuitize using the GMIB. However, for certain clients representing approximately 36 percent of the total GMIB guaranteed value there are several years of annuitization experience. For these clients the annuitization function reflects the actual experience and has a maximum annuitization rate per annum of 8 percent (a higher maximum applies in the first year a policy is eligible to annuitize using the GMIB—it is over 13 percent). For most clients, there is not a credible amount of observable relevant behavior data and so we use a weighted-average (with a heavier weighting on the observed experience noted previously) of three different annuitization functions with maximum annuitization rates per annum of 8 percent, 12 percent, and 30 percent, respectively (with significantly higher rates in the first year a policy is eligible to annuitize using the GMIB). The GMIB reinsurance treaties include claim limits to protect ACE in the event that actual annuitization behavior is significantly higher than expected.
The effect of changes in key market factors on assumed lapse and annuitization rates reflect emerging trends using data available from cedants. For treaties with limited experience, rates are established in line with data received from other ceding companies adjusted, as appropriate, with industry estimates. The model and related assumptions are continuously re-evaluated by management and enhanced, as appropriate, based upon additional experience obtained related to policyholder behavior and availability of more information, such as market conditions, market participant assumptions, and demographics of in-force annuities. During 2012, no material changes were made to actuarial or behavioral assumptions. We made minor technical refinements to the model with a favorable net income impact of approximately $49 million, $14 million, and $98 million for the years ended December 31, 2012, 2011, and 2010 respectively.
We view the variable annuity reinsurance business as having a similar risk profile to that of catastrophe reinsurance, with the probability of a cumulative long-term economic net loss relatively small at the time of pricing. However, adverse changes in market factors and policyholder behavior will have an adverse impact on net income, which may be material. Because of the significant use of unobservable inputs including policyholder behavior, GLB reinsurance is classified within Level 3.
The following tables present, by valuation hierarchy, the financial instruments measured at fair value on a recurring basis: 
December 31, 2012
Level 1

 
Level 2

 
Level 3

 
Total

(in millions of U.S. dollars)
 
 
 
Assets:
 
 
 
 
 
 
 
Fixed maturities available for sale
 
 
 
 
 
 
 
U.S. Treasury and agency
$
2,050

 
$
1,685

 
$
—

 
$
3,735

Foreign
222

 
13,431

 
60

 
13,713

Corporate securities
20

 
16,586

 
102

 
16,708

Mortgage-backed securities
—

 
10,460

 
13

 
10,473

States, municipalities, and political subdivisions
—

 
2,677

 
—

 
2,677

 
2,292

 
44,839

 
175

 
47,306

Equity securities
253

 
488

 
3

 
744

Short-term investments
1,503

 
725

 
—

 
2,228

Other investments
268

 
196

 
2,252

 
2,716

Securities lending collateral
—

 
1,791

 
—

 
1,791

Investment derivative instruments
11

 
—

 
—

 
11

Other derivative instruments
(6
)
 
30

 
—

 
24

Separate account assets
872

 
71

 
—

 
943

Total assets measured at fair value
$
5,193

 
$
48,140

 
$
2,430

 
$
55,763

Liabilities:
 
 
 
 
 
 
 
GLB(1)
$
—

 
$
—

 
$
1,119

 
$
1,119

(1) 
Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. Refer to Note 5 c) for additional information.

 
December 31, 2011
Level 1

 
Level 2

 
Level 3

 
Total

(in millions of U.S. dollars)
 
 
 
Assets:
 
 
 
 
 
 
 
Fixed maturities available for sale
 
 
 
 
 
 
 
U.S. Treasury and agency
$
1,691

 
$
1,264

 
$
5

 
$
2,960

Foreign
212

 
12,156

 
33

 
12,401

Corporate securities
20

 
14,539

 
134

 
14,693

Mortgage-backed securities
—

 
10,173

 
28

 
10,201

States, municipalities, and political subdivisions
—

 
1,711

 
1

 
1,712

 
1,923

 
39,843

 
201

 
41,967

Equity securities
215

 
419

 
13

 
647

Short-term investments
1,246

 
1,055

 
—

 
2,301

Other investments
208

 
229

 
1,877

 
2,314

Securities lending collateral
—

 
1,375

 
—

 
1,375

Investment derivative instruments
10

 
—

 
—

 
10

Other derivative instruments
(16
)
 
54

 
3

 
41

Separate account assets
607

 
53

 
—

 
660

Total assets measured at fair value
$
4,193

 
$
43,028

 
$
2,094

 
$
49,315

Liabilities:
 
 
 
 
 
 
 
GLB(1)
$
—

 
$
—

 
$
1,319

 
$
1,319

(1) 
Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. Refer to Note 5 c) for additional information.
The transfers from Level 1 to Level 2 were $40 million and the transfers from Level 2 to Level 1 were $15 million during the year ended December 31, 2012. The transfers between Level 1 and Level 2 during the years ended December 31, 2011 and 2010 were not material. Level 2 equity securities in the above table at December 31, 2011 were adjusted to include a $417 million investment previously classified as Level 1.

Fair value of alternative investments
Included in Other investments in the fair value hierarchy at December 31, 2012 and 2011 are investment funds, limited partnerships, and partially-owned investment companies measured at fair value using NAV as a practical expedient. At December 31, 2012, there were no probable or pending sales related to any of the investments measured at fair value using NAV. 
The following table presents, by investment category, the expected liquidation period, fair value, and maximum future funding commitments of alternative investments: 
 
 
 
December 31
 
 
December 31
 
 
 
 
2012
 
 
2011
 
(in millions of U.S. dollars)
Expected
Liquidation
Period
 
Fair Value

 
Maximum
Future Funding
Commitments

 
Fair Value

 
Maximum
Future Funding
Commitments

Financial
5 to 9 Years
 
$
225

 
$
111

 
$
205

 
$
141

Real estate
3 to 9 Years
 
292

 
62

 
270

 
96

Distressed
6 to 9 Years
 
192

 
152

 
182

 
57

Mezzanine
6 to 9 Years
 
284

 
279

 
195

 
282

Traditional
3 to 8 Years
 
711

 
587

 
565

 
200

Vintage
1 to 3 Years
 
14

 
—

 
18

 
1

Investment funds
Not Applicable
 
395

 
—

 
378

 
—

 
 
 
$
2,113

 
$
1,191

 
$
1,813

 
$
777


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

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

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

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

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

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

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

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

Level 3 financial instruments
The fair value of assets and liabilities measured at fair value using significant unobservable inputs (Level 3) consist of various inputs and assumptions that management makes when determining fair value. Management analyzes changes in fair value measurements classified within Level 3 by comparing pricing and returns of our investments to benchmarks, including month-over-month movements, investment credit spreads, interest rate movements, and credit quality of securities.
The following table presents the significant unobservable inputs used in the Level 3 liability valuations. Excluded from the table below are inputs used to fair value Level 3 assets which are based on single broker quotes or net asset value and contain no quantitative unobservable inputs developed by management.
(in millions of U.S. dollars)
Fair Value at
December 31, 2012

 
Valuation
Technique
 
Significant
Unobservable Inputs
 
Ranges
GLB(1)
$
1,119

 
Actuarial model
 
Lapse rate
 
1% - 30%
 
 
 
 
 
Annuitization rate
 
0% - 50%
(1) 
Discussion of the most significant inputs used in the fair value measurement of GLB and the sensitivity of those assumptions is included within Note 4 a) Guaranteed living benefits.
The following tables present a reconciliation of the beginning and ending balances of financial instruments measured at fair value using significant unobservable inputs (Level 3): 
 
Assets
 
 
Liabilities

 
Available-for-Sale Debt Securities
 
 
Equity
securities

 
Other
investments

 
Other
derivative
instruments

 
GLB(1)

Year Ended December 31, 2012
U.S.
Treasury
and
agency

 
Foreign

 
Corporate
securities

 
MBS

 
States,
municipalities,
and political
subdivisions

 
(in millions of U.S. dollars)
 
 
 
 
 
Balance-Beginning of year
$
5

 
$
33

 
$
134

 
$
28

 
$
1

 
$
13

 
$
1,877

 
$
3

 
$
1,319

Transfers into Level 3
—

 
49

 
37

 
22

 
1

 
2

 
53

 
—

 
—

Transfers out of Level 3
(4
)
 
(13
)
 
(46
)
 
(35
)
 
(1
)
 
(11
)
 
—

 
—

 
—

Change in Net Unrealized Gains (Losses) included in OCI
—

 
(1
)
 
6

 
—

 
—

 
—

 
55

 
—

 
—

Net Realized Gains/Losses
—

 
—

 
(1
)
 
—

 
—

 
—

 
(7
)
 
(4
)
 
(200
)
Purchases
—

 
46

 
24

 
9

 
—

 
4

 
520

 
3

 
—

Sales
—

 
(53
)
 
(19
)
 
(7
)
 
—

 
(5
)
 
(9
)
 
—

 
—

Settlements
(1
)
 
(1
)
 
(33
)
 
(4
)
 
(1
)
 
—

 
(237
)
 
(2
)
 
—

Balance-End of Year
$
—

 
$
60

 
$
102

 
$
13

 
$
—

 
$
3

 
$
2,252

 
$
—

 
$
1,119

Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet Date
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
(7
)
 
$
—

 
$
(200
)
(1) 
Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. Refer to Note 5 c) for additional information.
 
Assets
 
 
Liabilities

 
Available-for-Sale Debt Securities
 
 
Equity
securities

 
Other
investments

 
Other
derivative
instruments

 
GLB(1)

Year Ended December 31, 2011
U.S.
Treasury
and
Agency

 
Foreign

 
Corporate
securities

 
MBS

 
States,
municipalities,
and political
subdivisions

 
(in millions of U.S. dollars)
 
 
 
 
 
 
 
 
Balance-Beginning of year
$
—

 
$
26

 
$
115

 
$
39

 
$
2

 
$
13

 
$
1,432

 
$
4

 
$
507

Transfers into Level 3
—

 
9

 
42

 
4

 
—

 
—

 
—

 
—

 
—

Transfers out of Level 3
—

 
(18
)
 
(4
)
 
(48
)
 
—

 
—

 
—

 
—

 
—

Change in Net Unrealized Gains (Losses) included in OCI
—

 
(1
)
 
(2
)
 
—

 
—

 
(1
)
 
93

 
—

 
—

Net Realized Gains/Losses
—

 
—

 
(3
)
 
—

 
—

 
4

 
(3
)
 
2

 
812

Purchases
5

 
23

 
32

 
59

 
—

 
5

 
602

 
—

 
—

Sales
—

 
(3
)
 
(27
)
 
(17
)
 
—

 
(8
)
 
(55
)
 
—

 
—

Settlements
—

 
(3
)
 
(19
)
 
(9
)
 
(1
)
 
—

 
(192
)
 
(3
)
 
—

Balance-End of Year
$
5

 
$
33

 
$
134

 
$
28

 
$
1

 
$
13

 
$
1,877

 
$
3

 
$
1,319

Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet Date
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
(3
)
 
$
(1
)
 
$
812

(1) 
Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. The liability for GLB reinsurance was $1.5 billion at December 31, 2011 and $648 million at December 31, 2010, which includes a fair value derivative adjustment of $1.3 billion and $507 million, respectively. 

 
Assets
 
 
Liabilities

 
Available-for-Sale Debt Securities
 
 
 
 
 
 
 
 
GLB(1)

Year Ended December 31, 2010
Foreign

 
Corporate
securities

 
MBS

 
States,
municipalities,
and political
subdivisions

 
Equity
securities

Other
investments

Other
derivative
instruments

(in millions of U.S. dollars)
 
 
 
 
 
 
 
Balance-Beginning of year
$
59

 
$
168

 
$
21

 
$
3

 
$
12

 
$
1,149

 
$
14

 
$
443

Transfers into (Out of) Level 3
(14
)
 
(25
)
 
(1
)
 
—

 
1

 
—

 
—

 
—

Change in Net Unrealized Gains (Losses) included in OCI
1

 
9

 
—

 
—

 
—

 
53

 
—

 
—

Net Realized Gains/Losses
1

 
(3
)
 
—

 
—

 
1

 
(7
)
 
2

 
64

Purchases, Sales, Issuances, and Settlements, Net
(21
)
 
(34
)
 
19

 
(1
)
 
(1
)
 
237

 
(12
)
 
—

Balance-End of Year
$
26

 
$
115

 
$
39

 
$
2

 
$
13

 
$
1,432

 
$
4

 
$
507

Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet Date
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
(7
)
 
$
1

 
$
64

(1) 
Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. The liability for GLB reinsurance was $648 million at December 31, 2010 and $559 million at December 31, 2009, which includes a fair value derivative adjustment of $507 million and $443 million, respectively. 

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

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

Short- and long-term debt and trust preferred securities
Where practical, fair values for short-term debt, long-term debt, and trust preferred securities are estimated using discounted cash flow calculations based principally on observable inputs including incremental borrowing rates, which reflect ACE’s credit rating, for similar types of borrowings with maturities consistent with those remaining for the debt being valued.
The following table presents carrying values and fair values of financial instruments not measured at fair value:
 
December 31
 
 
December 31
 
 
2012
 
 
2011
 
(in millions of U.S. dollars)
Carrying Value

 
Fair Value

 
Carrying Value

 
Fair Value

Assets:
 
 
 
 
 
 
 
Fixed maturities held to maturity
 
 
 
 
 
 
 
U.S. Treasury and agency
$
1,044

 
$
1,083

 
$
1,078

 
$
1,126

Foreign
910

 
964

 
935

 
930

Corporate securities
2,133

 
2,275

 
2,338

 
2,337

Mortgage-backed securities
2,028

 
2,116

 
2,949

 
3,036

States, municipalities, and political subdivisions
1,155

 
1,195

 
1,147

 
1,176


7,270

 
7,633

 
8,447

 
8,605

Partially-owned insurance companies
454

 
454

 
352

 
352

Total assets
$
7,724

 
$
8,087

 
$
8,799

 
$
8,957

Liabilities:
 
 
 
 
 
 
 
Short-term debt
$
1,401

 
$
1,401

 
$
1,251

 
$
1,251

Long-term debt
3,360

 
3,916

 
3,360

 
3,823

Trust preferred securities
309

 
446

 
309

 
404

Total liabilities
$
5,070

 
$
5,763

 
$
4,920

 
$
5,478


 
The following table presents, by valuation hierarchy, the financial instruments not measured at fair value: 
 
December 31, 2012
 
(in millions of U.S. dollars)
Level 1

 
Level 2

 
Level 3

 
Total

Assets:
 
 
 
 
 
 
 
Fixed maturities held to maturity
 
 
 
 
 
 
 
U.S. Treasury and agency
$
619

 
$
464

 
$
—

 
$
1,083

Foreign
—

 
964

 
—

 
964

Corporate securities
—

 
2,257

 
18

 
2,275

Mortgage-backed securities
—

 
2,116

 
—

 
2,116

States, municipalities, and political subdivisions
—

 
1,195

 
—

 
1,195

 
619

 
6,996

 
18

 
7,633

Partially-owned insurance companies
—

 
—

 
454

 
454

Total assets
$
619

 
$
6,996

 
$
472

 
$
8,087

Liabilities:
 
 
 
 
 
 
 
Short-term debt
$
—

 
$
1,401

 
$
—

 
$
1,401

Long-term debt
—

 
3,916

 
—

 
3,916

Trust preferred securities
—

 
446

 
—

 
446

Total liabilities
$
—

 
$
5,763

 
$
—

 
$
5,763

Reinsurance
Reinsurance
Reinsurance

a) Consolidated reinsurance
ACE purchases reinsurance to manage various exposures including catastrophe risks. Although reinsurance agreements contractually obligate ACE's reinsurers to reimburse it for the agreed-upon portion of its gross paid losses, they do not discharge ACE's primary liability. The amounts for net premiums written and net premiums earned in the consolidated statements of operations are net of reinsurance. The following table presents direct, assumed, and ceded premiums:
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012
 
 
2011
 
 
2010
 
Premiums written
 
 
 
 
 
 
Direct
$
18,144

 
$
17,626

 
$
15,887

Assumed
 
3,449

 
 
3,205

 
 
3,624

Ceded
 
(5,518
)
 
 
(5,459
)
 
 
(5,803
)
Net
$
16,075

 
$
15,372

 
$
13,708

Premiums earned
 
 
 
 

 
 

Direct
$
17,802

 
$
17,534

 
$
15,780

Assumed
 
3,302

 
 
3,349

 
 
3,516

Ceded
 
(5,427
)
 
 
(5,496
)
 
 
(5,792
)
Net
$
15,677

 
$
15,387

 
$
13,504



For the years ended December 31, 2012, 2011, and 2010, reinsurance recoveries on losses and loss expenses incurred were $4.3 billion, $3.3 billion, and $3.3 billion, respectively.

b) Reinsurance recoverable on ceded reinsurance
The following table presents the composition of reinsurance recoverable on losses and loss expenses:
 
 
December 31
 
 
December 31
 
(in millions of U.S. dollars)
2012
 
 
2011
 
Reinsurance recoverable on unpaid losses and loss expenses (1)

$
11,399

 

$
11,602

Reinsurance recoverable on paid losses and loss expenses (1)
 
679

 
 
787

Net reinsurance recoverable on losses and loss expenses

$
12,078

 

$
12,389


(1) 
Net of a provision for uncollectible reinsurance.

We evaluate the financial condition of our reinsurers and potential reinsurers on a regular basis and also monitor concentrations of credit risk with reinsurers. The provision for uncollectible reinsurance is required principally due to the potential failure of reinsurers to indemnify ACE, primarily because of disputes under reinsurance contracts and insolvencies. We have established provisions for amounts estimated to be uncollectible. At December 31, 2012 and 2011, we recorded a provision for uncollectible reinsurance of $439 million and $479 million, respectively.

The following tables present a listing, at December 31, 2012, of the categories of ACE's reinsurers. The first category, largest reinsurers, represents all groups of reinsurers where the gross recoverable exceeds one percent of ACE's total shareholders' equity. The provision for uncollectible reinsurance for the largest reinsurers, other reinsurers rated A- or better, and other reinsurers with ratings lower than A- is principally based on an analysis of the credit quality of the reinsurer and collateral balances. Other pools and government agencies include amounts backed by certain state and federal agencies. In certain states, insurance companies are required by law to participate in these pools. Structured settlements include annuities purchased from life insurance companies to settle claims. Since we retain the ultimate liability in the event that the life company fails to pay, we reflect the amount as a liability and a recoverable/receivable for GAAP purposes. Captives include companies established and owned by our insurance clients to assume a significant portion of their direct insurance risk from ACE (they are structured to allow clients to self-insure a portion of their insurance risk). It is generally our policy to obtain collateral equal to expected losses. Where appropriate, exceptions are granted but only with review and approval at a senior officer level. The final category, Other, includes amounts recoverable that are in dispute or are from companies that are in supervision, rehabilitation, or liquidation. We establish the provision for uncollectible reinsurance in this category based on a case by case analysis of individual situations including the merits of the underlying matter, credit and collateral analysis, and consideration of our collection experience in similar situations.

(in millions of U.S. dollars, except percentages)
2012
 
 
Provision
 
 
% of Gross

Categories
 
Largest reinsurers

$
5,800

 

$
98

 
1.7
%
Other reinsurers balances rated A- or better
 
3,080

 
 
40

 
1.3
%
Other reinsurers balances with ratings lower than A- or not rated
 
602

 
 
120

 
19.9
%
Other pools and government agencies
 
383

 
 
14

 
3.7
%
Structured settlements
 
582

 
 
24

 
4.1
%
Captives
 
1,761

 
 
14

 
0.8
%
Other
 
309

 
 
129

 
41.7
%
Total

$
12,517

 

$
439

 
3.5
%


Largest Reinsurers
 
 
 
Berkshire Hathaway Insurance Group
Lloyd's of London
Swiss Re Group
Federal Crop Insurance Corporation
Munich Re Group
Transatlantic Holdings
HDI Re Group (Hanover Re)
Partner Re
XL Capital Group


 

c) Assumed life reinsurance programs involving minimum benefit guarantees under annuity contracts
The following table presents income and expenses relating to GMDB and GLB reinsurance. GLBs include GMIBs as well as some GMABs originating in Japan.
 
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

GMDB
 
 
 
 
 
Net premiums earned
$
85

 
$
98

 
$
109

Policy benefits and other reserve adjustments
$
60

 
$
59

 
$
99

GLB
 
 
 
 
 
Net premiums earned
$
160

 
$
163

 
$
164

Policy benefits and other reserve adjustments
61

 
47

 
29

Net realized gains (losses)
203

 
(812
)
 
(64
)
Gain (loss) recognized in income
$
302

 
$
(696
)
 
$
71

Net cash received
$
149

 
$
161

 
$
160

Net (increase) decrease in liability
$
153

 
$
(857
)
 
$
(89
)

At December 31, 2012, reported liabilities for GMDB and GLB reinsurance were $90 million and $1.4 billion, respectively, compared with $138 million and $1.5 billion, respectively, at December 31, 2011. The reported liability for GLB reinsurance of $1.4 billion at December 31, 2012, and $1.5 billion at December 31, 2011, includes a fair value derivative adjustment of $1.1 billion and $1.3 billion, respectively. Included in Net realized gains (losses) in the table above are gains (losses) related to foreign exchange and other fair value derivative adjustments. Reported liabilities for both GMDB and GLB reinsurance are determined using internal valuation models. Such valuations require considerable judgment and are subject to significant uncertainty. The valuation of these products is subject to fluctuations arising from, among other factors, changes in interest rates, changes in equity markets, changes in credit markets, changes in the allocation of the investments underlying annuitants’ account values, and assumptions regarding future policyholder behavior. These models and the related assumptions are continually reviewed by management and enhanced, as appropriate, based upon improvements in modeling assumptions and availability of more information, such as market conditions and demographics of in-force annuities.
Variable Annuity Net Amount at Risk
(i) Reinsurance covering the GMDB risk only
At December 31, 2012 and 2011, the net amount at risk from reinsurance programs covering the GMDB risk only was $1.3 billion and $1.8 billion, respectively.
For reinsurance programs covering the GMDB risk only, the net amount at risk is defined as the present value of future claim payments under the following assumptions:
•
policy account values and guaranteed values are fixed at the valuation date (December 31, 2012 and 2011, respectively);
•
there are no lapses or withdrawals;
•
mortality according to 100 percent of the Annuity 2000 mortality table;
•
future claims are discounted in line with the discounting assumption used in the calculation of the benefit reserve averaging between 1.0 percent and 2.0 percent; and
•
reinsurance coverage ends at the earlier of the maturity of the underlying variable annuity policy or the reinsurance treaty.
The total claim amount payable on reinsurance programs covering the GMDB risk only, if all the cedants’ policyholders were to die immediately at December 31, 2012 was approximately $495 million. This takes into account all applicable reinsurance treaty claim limits.
(ii) Reinsurance covering the GLB risk only
At December 31, 2012 and 2011, the net amount at risk from reinsurance programs covering the GLB risk only was $445 million and $380 million, respectively.
For reinsurance programs covering the GLB risk only, the net amount at risk is defined as the present value of future claim payments under the following assumptions:
•
policy account values and guaranteed values are fixed at the valuation date (December 31, 2012 and 2011, respectively);
•
there are no deaths, lapses, or withdrawals;
•
policyholders annuitize at a frequency most disadvantageous to ACE (in other words, annuitization at a level that maximizes claims taking into account the treaty limits) under the terms of the reinsurance contracts;
•
for annuitizing policyholders, the GMIB claim is calculated using interest rates in line with those used in calculating the reserve;
•
future claims are discounted in line with the discounting assumption used in the calculation of the benefit reserve averaging between 3.5 percent and 4.5 percent; and
•
reinsurance coverage ends at the earlier of the maturity of the underlying variable annuity policy or the reinsurance treaty. 
(iii) Reinsurance covering both the GMDB and GLB risks on the same underlying policyholders
At December 31, 2012 and 2011, the GMDB net amount at risk from reinsurance programs covering both the GMDB and GLB risks on the same underlying policyholders was $116 million and $182 million, respectively.
At December 31, 2012 and 2011, the GLB net amount at risk from reinsurance programs covering both the GMDB and GLB risks on the same underlying policyholders was $655 million and $998 million, respectively.
These net amounts at risk reflect the interaction between the two types of benefits on any single policyholder (eliminating double-counting), and therefore the net amounts at risk should be considered additive.
For reinsurance programs covering both the GMDB and GLB risks on the same underlying policyholders, the net amount at risk is defined as the present value of future claim payments under the following assumptions:
•
policy account values and guaranteed values are fixed at the valuation date (December 31, 2012 and 2011, respectively);
•
there are no lapses, or withdrawals;
•
mortality according to 100 percent of the Annuity 2000 mortality table;
•
policyholders annuitize at a frequency most disadvantageous to ACE (in other words, annuitization at a level that maximizes claims taking into account the treaty limits) under the terms of the reinsurance contracts;
•
for annuitizing policyholders, the GMIB claim is calculated using interest rates in line with those used in calculating the reserve;
•
future claims are discounted in line with the discounting assumption used in the calculation of the benefit reserve averaging between 1.5 percent and 2.5 percent; and
•
reinsurance coverage ends at the earlier of the maturity of the underlying variable annuity policy or the reinsurance treaty.
The total claim amount payable on reinsurance programs covering both the GMDB and GLB risks on the same underlying policyholders, if all of the cedants’ policyholders were to die immediately at December 31, 2012 was approximately $640 million. This takes into account all applicable reinsurance treaty claim limits. Although there would be an increase in death claims resulting from 100 percent immediate mortality of all policyholders, the GLB claims would be zero.
The average attained age of all policyholders under sections i), ii), and iii) above, weighted by the guaranteed value of each reinsured policy, is approximately 68 years.
Intangible Assets
Intangible assets
Intangible assets

Included in Goodwill and other intangible assets in the consolidated balance sheets at December 31, 2012 and 2011, are goodwill of $4.3 billion and $4.1 billion, respectively, and other intangible assets of $656 million and $651 million, respectively.

The following table presents a roll-forward of Goodwill by business segment:
(in millions of U.S. dollars)
Insurance – North American

 
Insurance – Overseas General

 
Global Reinsurance

 
Life

 
ACE Consolidated

Balance at December 31, 2010
$
1,351

 
$
1,564

 
$
365

 
$
750

 
$
4,030

Purchase price allocation adjustment
(12
)
 
5

 
—

 
—

 
(7
)
Acquisition of New York Life's Korea operations and Hong Kong operations
—

 
—

 
—

 
89

 
89

Acquisition of PMHC
11

 
—

 
—

 
—

 
11

Acquisition of Rio Guayas
—

 
31

 
—

 
—

 
31

Foreign exchange revaluation and other
—

 
3

 
—

 
(9
)
 
(6
)
Balance at December 31, 2011
$
1,350

 
$
1,603

 
$
365

 
$
830

 
$
4,148

Purchase price allocation adjustment
—

 
—

 
—

 
4

 
4

Acquisition of JaPro
—

 
123

 
—

 
—

 
123

Foreign exchange revaluation and other
3

 
38

 
—

 
3

 
44

Balance at December 31, 2012
$
1,353


$
1,764

 
$
365

 
$
837

 
$
4,319



Included in the other intangible assets balance at December 31, 2012, are intangible assets subject to amortization of $554 million and intangible assets not subject to amortization of $102 million. Intangible assets subject to amortization include agency relationships, software, client lists, renewal rights, and trademarks, primarily attributable to the acquisitions of Rain and Hail and Combined Insurance. The majority of the balance of intangible assets not subject to amortization relates to Lloyd's of London (Lloyd's) Syndicate 2488 (Syndicate 2488) capacity. Amortization expense related to other intangible assets amounted to $51 million, $29 million, and $9 million for the years ended December 31, 2012, 2011, and 2010, respectively.

The following table presents a roll-forward of VOBA:
(in millions of U.S. dollars)
2012

 
2011

 
2010

Balance, beginning of year
$
676

 
$
634

 
$
748

Acquisition of New York Life's Korea operations and Hong Kong operations
—

 
151

 
—

Amortization expense
(82
)
 
(108
)
 
(111
)
Foreign exchange revaluation
20

 
(1
)
 
(3
)
Balance, end of year
$
614

 
$
676

 
$
634



The following table presents the estimated amortization expense related to other intangible assets and VOBA for the next five years:
For the Year Ending December 31
Other intangible assets

 
VOBA

(in millions of U.S. dollars)
 
2013
$
49

 
$
67

2014
45

 
58

2015
40

 
51

2016
35

 
45

2017
33

 
42

Total
$
202

 
$
263

Unpaid losses and loss expenses
Unpaid Losses and Loss Expenses
Unpaid losses and loss expenses

ACE establishes reserves for the estimated unpaid ultimate liability for losses and loss expenses under the terms of its policies and agreements. These reserves include estimates for both claims that have been reported and for IBNR, and include estimates of expenses associated with processing and settling these claims. These reserves are recorded in Unpaid losses and loss expenses in the consolidated balance sheets. The process of establishing loss and loss expense reserves for P&C claims can be complex and is subject to considerable uncertainty as it requires the use of informed estimates and judgments. Our estimates and judgments may be revised as additional experience and other data become available and are reviewed, as new or improved methodologies are developed, or as laws change. We continually evaluate our estimate of reserves in light of developing information and in light of discussions and negotiations with our insureds. While we believe that our reserves for unpaid losses and loss expenses at December 31, 2012 are adequate, new information or trends may lead to future developments in ultimate losses and loss expenses significantly greater or less than the reserves provided. Any such revisions could result in future changes in estimates of losses or reinsurance recoverable and would be reflected in our results of operations in the period in which the estimates are changed.

The following table presents a reconciliation of unpaid losses and loss expenses:

 
Years Ended December 31
 
(in millions of U.S. dollars)
2012
 
 
2011
 
 
2010
 
Gross unpaid losses and loss expenses, beginning of year
 
$
37,477

 

$
37,391

 

$
37,783

Reinsurance recoverable on unpaid losses(1)
 
(11,602
)
 
 
(12,149
)
 
 
(12,745
)
Net unpaid losses and loss expenses, beginning of year
 
25,875

 
 
25,242

 
 
25,038

Acquisition of subsidiaries
 
14

 
 
92

 
 
145

Total
 
25,889

 
 
25,334

 
 
25,183

Net losses and loss expenses incurred in respect of losses occurring in:
 
 
 
 
 
 
 
 
Current year
 
10,132

 
 
10,076

 
 
8,082

Prior years
 
(479
)
 
 
(556
)
 
 
(503
)
Total
 
9,653

 
 
9,520

 
 
7,579

Net losses and loss expenses paid in respect of losses occurring in:
 
 
 
 
 
 
 
 
Current year
 
4,325

 
 
4,209

 
 
2,689

Prior years
 
4,894

 
 
4,657

 
 
4,724

Total
 
9,219

 
 
8,866

 
 
7,413

Foreign currency revaluation and other
 
224

 
 
(113
)
 
 
(107
)
Net unpaid losses and loss expenses, end of year
 
26,547

 
 
25,875

 
 
25,242

Reinsurance recoverable on unpaid losses(1)
 
11,399

 
 
11,602

 
 
12,149

Gross unpaid losses and loss expenses, end of year
 
$
37,946

 
 
$
37,477

 
 
$
37,391

(1) Net of provision for uncollectible reinsurance.
 
 
 
 
 
 
 
 


Net losses and loss expenses incurred includes $479 million, $556 million, and $503 million, of net favorable prior period development in the years ended December 31, 2012, 2011, and 2010, respectively. The following is a summary of prior period development for the periods indicated. The remaining net development for long-tail and short-tail business for each segment comprises numerous favorable and adverse movements across lines and accident years.

Insurance – North American
Insurance – North American's active operations experienced net favorable prior period development of $360 million in 2012, representing 2.2 percent of net unpaid reserves at December 31, 2011. Net prior period development was the net result of several underlying favorable and adverse movements. Net favorable development of $245 million on long-tail business included favorable development of $73 million on umbrella and excess casualty business primarily affecting the 2007 and prior accident years; $67 million in the directors and officers (D&O) portfolio affecting the 2007 and prior accident years; $57 million on medical risk operations primarily affecting the 2007 and prior accident years; and $39 million on the national accounts portfolios (commercial auto liability, general liability, and workers' compensation lines of business). Net prior period development also included favorable development of $9 million across a number of lines and accident years, none of which was significant individually or in the aggregate. Favorable development of $115 million on short-tail business included favorable development of $88 million in the property, inland marine and commercial marine portfolios primarily arising on the 2009 through 2011 accident years and favorable development of $27 million on aviation product lines affecting the 2009 and prior accident years.

Insurance – North American's run-off operations incurred net adverse prior period development of $168 million in the Westchester and Brandywine run-off operations during 2012, which was the net result of adverse movements impacting accident years 2001 and prior, representing one percent of net unpaid reserves at December 31, 2011. Net adverse prior period development was driven by adverse development of $150 million related to the completion of the reserve review during 2012 and $18 million of unallocated loss adjustment expenses due to run-off operating expenses reserved and paid during 2012.

Insurance – North American's active operations experienced net favorable prior period development of $297 million in 2011, representing 1.9 percent of net unpaid reserves at December 31, 2010. Net prior period development was the net result of several underlying favorable and adverse movements. Net favorable development of $186 million on long-tail business included favorable development of $82 million in the D&O portfolio affecting the 2006 and prior accident years; $54 million in the excess casualty business affecting the 2005 and prior accident years; $43 million on medical risk operations; $28 million on the national accounts portfolio (commercial auto liability, general liability, and workers' compensation lines of business); and $26 million within the financial solutions business relating to a single account on the 2002 through 2010 accident years. Additional favorable development included $26 million in the foreign casualty product affecting the 2007 and prior accident years and $21 million on surety business primarily impacting the 2009 year. Partially offsetting this favorable development was adverse development of $40 million on errors and omissions coverage primarily affecting the 2007 and 2008 accident years and adverse development of $29 million within the environmental liability product line concentrated in the 2005 through 2007 accident years. Net prior period development also included adverse development of $25 million on other lines across a number of accident years, none of which was significant individually or in the aggregate. Net favorable development of $111 million on short-tail business included favorable development of $48 million in the property portfolios primarily affecting the 2009 and 2010 accident years and favorable development of $63 million on other lines across a number of accident years, primarily following better than expected loss emergence.

Insurance – North American's run-off operations incurred net adverse prior period development of $102 million in the Westchester and Brandywine run-off operations during 2011, which was the net result of adverse movements impacting the accident years 2000 and prior, representing 0.6 percent of net unpaid reserves at December 31, 2010. Net adverse prior period development was driven by adverse development of $82 million related to the completion of the reserve review during 2011 and $17 million of unallocated loss adjustment expenses due to operating expenses reserved and paid during 2011. Net prior period development also included $3 million of adverse development on other lines across a number of accident years, none of which was significant individually or in the aggregate.

Insurance – North American experienced net favorable prior period development of $107 million in 2010, representing 0.7 percent of the segment's net unpaid reserves at December 31, 2009.

Insurance – Overseas General
Insurance – Overseas General experienced net favorable prior period development of $226 million in 2012 representing 3.1 percent of net unpaid reserves at December 31, 2011. Net prior period development was the net result of several underlying favorable and adverse movements. Net favorable development of $121 million on long-tail business included favorable development of $150 million in casualty (primary and excess) and financial lines for accident years 2008 and prior, and adverse development of $29 million in the casualty (mainly primary) and financial lines for accident years 2009 through 2011. Favorable development of $105 million on short-tail business included property, marine, A&H, and personal lines across multiple geographical regions, and within both retail and wholesale operations, principally as a result of lower than expected loss emergence, mostly on accident years 2009 and 2010.

Insurance – Overseas General experienced net favorable prior period development of $290 million in 2011 representing 4.2 percent of net unpaid reserves at December 31, 2010. Net prior period development was the net result of several underlying favorable and adverse movements. Net favorable development of $154 million on long-tail business included favorable development of $337 million in casualty (primary and excess) and financial lines for accident years 2007 and prior, and adverse development of $183 million in the casualty (primary and excess) and financial lines book for accident years 2008 through 2010. Net favorable development of $136 million on short-tail business included property, marine, A&H, and energy lines across multiple geographical regions, and within both retail and wholesale operations, principally on accident years 2008 and 2009.

Insurance – Overseas General experienced net favorable prior period development of $290 million in 2010, representing 4.3 percent of the segment's net unpaid reserves at December 31, 2009.

Global Reinsurance
Global Reinsurance experienced net favorable prior period development of $61 million in 2012 representing 2.7 percent of net unpaid reserves at December 31, 2011. Net prior period development was the net result of several underlying favorable and adverse movements. Net favorable development of $32 million on long-tail business included favorable development of $54 million principally in treaty years 2008 and prior in casualty and medical malpractice lines. Net adverse development of $18 million on non-medical professional liability composed of favorable development on treaty years 2005 and prior, offset by adverse development on treaty years 2006 through 2011. Net prior period development also included $4 million of adverse development across a number of lines and treaty years, none of which was significant individually or in the aggregate. Net favorable development of $29 million on short-tail business, principally in treaty years 2010 and prior across property lines (including property catastrophe), trade credit, marine, and surety.

Global Reinsurance experienced net favorable prior period development of $71 million in 2011 representing 3.1 percent of net unpaid reserves at December 31, 2010. Net prior period development was the net result of several underlying favorable and adverse movements. Net favorable development of $58 million on long-tail business included net favorable development of $79 million principally in treaty years 2007 and prior across a number of portfolios (professional liability, D&O, casualty, and medical malpractice). Net favorable development of $13 million on short-tail business, primarily in treaty years 2009 and prior across property lines (including property catastrophe), trade credit, and surety.

Global Reinsurance experienced net favorable prior period development of $106 million in 2010, representing 4.7 percent of the segment's net unpaid reserves at December 31, 2009.

Asbestos and environmental (A&E) and other run-off liabilities
Included in liabilities for losses and loss expenses are amounts for A&E (A&E liabilities). The A&E liabilities principally relate to claims arising from bodily-injury claims related to asbestos products and remediation costs associated with hazardous waste sites. The estimation of A&E liabilities is particularly sensitive to future changes in the legal, social, and economic environment. ACE has not assumed any such future changes in setting the value of its A&E reserves, which include provisions for both reported and IBNR claims.

ACE's exposure to A&E claims principally arises out of liabilities acquired when it purchased Westchester Specialty in 1998 and CIGNA's P&C business in 1999, with the larger exposure contained within the liabilities acquired in the CIGNA transaction. In 1996, prior to ACE's acquisition of CIGNA's P&C business, the Pennsylvania Insurance Commissioner approved a plan to restructure INA Financial Corporation and its subsidiaries (the Restructuring) which included the division of Insurance Company of North America (INA) into two separate corporations:

(1) An active insurance company that retained the INA name and continued to write P&C business; and
(2) An inactive run-off company, now called Century Indemnity Company (Century).

As a result of the division, predominantly all A&E and certain other liabilities of INA were ascribed to Century and extinguished, as a matter of Pennsylvania law, as liabilities of INA.

As part of the Restructuring, most A&E liabilities of various U.S. affiliates of INA were reinsured to Century. Century and certain other run-off companies having A&E and other liabilities were contributed to Brandywine Holdings. ACE acquired Brandywine Holdings and its various subsidiaries as part of the 1999 acquisition of CIGNA's P&C business. For additional information, refer to “Brandywine Run-Off Entities” below.

During 2012, we conducted our annual internal, ground-up review of our consolidated A&E liabilities as of December 31, 2011. As a result of the internal review, we increased our gross loss reserves in 2012 for the Brandywine operations, including A&E, by $275 million, while the net loss reserves increased by $146 million. In addition, we increased gross loss reserves for Westchester Specialty's A&E and other liabilities by $17 million, while the net loss reserves increased by $4 million.

In 2012, in addition to our annual internal review, a team of external actuaries performed an evaluation as to the adequacy of Century's reserves. This external review was conducted in accordance with the Brandywine Restructuring Order, which requires that an independent actuarial review of Century's reserves be completed every two years. Management takes full responsibility for the estimation of its A&E liabilities.

An internal review was also conducted during 2011 of consolidated A&E liabilities as of December 31, 2010. As a result of that internal review, we increased gross loss reserves in 2011 for the Brandywine operations, including A&E, by $241 million while the net loss reserves increased by $76 million. In addition, we decreased gross loss reserves for Westchester Specialty's A&E and other liabilities by $29 million, while the net loss reserves increased by $6 million.

ACE's A&E reserves are not discounted for GAAP reporting and do not reflect any anticipated future changes in the legal, social, or economic environment, or any benefit from future legislative reforms.

The table below presents a roll-forward of consolidated A&E loss reserves (excluding other run-off liabilities), allocated loss expense reserves for A&E exposures, and the provision for uncollectible paid and unpaid reinsurance recoverables:
 
Asbestos
 
Environmental
 
Total
(in millions of U.S. dollars)
Gross
 
 
Net
 
 
Gross
 
 
Net
 
 
Gross
 
 
Net
 
Balance at December 31, 2011(1)
 
$
2,086

 
 
$
1,142

 
 
$
245

 
 
$
162

 
 
$
2,331

 
 
$
1,304

Incurred activity
 
211

 
 
95

 
 
40

 
 
39

 
 
251

 
 
134

Paid activity
 
(440
)
 
 
(275
)
 
 
(78
)
 
 
(61
)
 
 
(518
)
 
 
(336
)
Balance at December 31, 2012
 
$
1,857

 
 
$
962

 
 
$
207

 
 
$
140

 
 
$
2,064

 
 
$
1,102

(1) 
Balances at December 31, 2011 have been adjusted to present claims in a manner consistent with balances disclosed at December 31, 2012.

The A&E net loss reserves including allocated loss expense reserves and provision for uncollectible reinsurance at December 31, 2012, of $1.1 billion shown in the table above comprise $852 million in reserves in respect of Brandywine operations, $151 million of reserves held by Westchester Specialty, $84 million of reserves held by Insurance – Overseas General, $12 million of reserves held by ACE Bermuda, and $3 million of reserves held by Penn Millers. The incurred activity of $134 million is primarily the result of adverse activity in Brandywine and Westchester of $110 million and $22 million, respectively.

The net figures in the above table reflect third-party reinsurance other than reinsurance provided by National Indemnity Company (NICO) under two aggregate excess of loss contracts described below (collectively, the NICO contracts).  ACE excludes the NICO contracts as they cover non-A&E liabilities as well as A&E liabilities.  The split of coverage provided under the NICO contracts for A&E liabilities as compared to non-A&E liabilities is entirely dependent on the timing of the payment of the related claims. ACE's ability to make an estimate of this split is not practicable. ACE believes, instead, that the A&E discussion is best provided excluding the NICO contracts, while separately discussing the NICO contracts in relation to the total subject business, both A&E and non-A&E, covered by those contracts.  With certain exceptions, the NICO contracts provide coverage for the net A&E incurred losses and allocated loss expenses within the limits of coverage and above ACE's retention levels.  These exceptions include losses arising from certain operations of Insurance – Overseas General and participation by ACE Bermuda as a co-reinsurer or retrocessionaire in the NICO contracts.

Brandywine run-off - impact of NICO contracts on ACE's run-off liabilities
As part of the acquisition of CIGNA's P&C business, NICO provided $2.5 billion of reinsurance protection to Century on all Brandywine loss and allocated loss adjustment expense reserves and on the A&E reserves of various ACE INA insurance subsidiaries reinsured by Century (in each case, including uncollectible reinsurance). The benefits of this NICO contract (the Brandywine NICO Agreement) flowed to the other Brandywine companies and to the ACE INA insurance subsidiaries through agreements between those companies and Century. The Brandywine NICO Agreement was exhausted on an incurred basis in 2002.

The following table presents a roll-forward of net loss reserves, allocated loss expense reserves, and provision for uncollectible paid and unpaid reinsurance recoverables in respect of Brandywine operations only, including the impact of the Brandywine NICO Agreement for the year ended December 31, 2012:
 
Brandywine
 
NICO Coverage
 
 
Net of NICO Coverage

(in millions of U.S. dollars)
A&E
 
 
Other
 
(1) 
Total
 
 
(2) 
Balance at December 31, 2011(3)
 
$
1,032

 
 
$
458

 
 
$
1,490

 
 
$
386

 
$
1,104

Incurred activity
 
110

 
 
19

 
 
129

 
 
—

 
129

Paid activity
 
(290
)
 
 
(56
)
 
 
(346
)
 
 
(368
)
 
22

Balance at December 31, 2012
 
$
852

 
 
$
421

 
 
$
1,273

 
 
$
18

 
$
1,255

(1) 
Other consists primarily of workers' compensation, non-A&E general liability losses, and provision for uncollectible reinsurance on non-A&E business.
(2) 
NICO Coverage at December 31, 2011 was reduced to reflect $238 million of advances from NICO on uncollected inuring reinsurance recoverables as payments reducing the limit.
(3) 
Balances at December 31, 2011 have been adjusted to present claims in a manner consistent with balances disclosed at December 31, 2012.

The incurred activity of $129 million primarily relates to the internal review of consolidated A&E liabilities as discussed above.

Westchester Specialty - impact of NICO contracts on ACE's run-off liabilities
As part of the Westchester Specialty acquisition in 1998, NICO provided a 75 percent pro-rata share of $1 billion of reinsurance protection on losses and loss adjustment expenses incurred on or before December 31, 1996, in excess of a retention of $721 million (the 1998 NICO Agreement). NICO has also provided an 85 percent pro-rata share of $150 million of reinsurance protection on losses and allocated loss adjustment expenses incurred on or before December 31, 1992, in excess of a retention of $755 million (the 1992 NICO Agreement). At December 31, 2012, the remaining unused incurred limit under the 1998 NICO Agreement was $492 million, which is only available for losses and loss adjustment expenses. The 1992 NICO Agreement was exhausted on a paid basis in 2009.

The following table presents a roll-forward of net loss reserves, allocated loss expense reserves, and provision for uncollectible paid and unpaid reinsurance recoverables in respect of 1996 and prior Westchester Specialty operations that are the subject business of the NICO covers for the year ended December 31, 2012:
 
Westchester Specialty
 
NICO Coverage
 
 
Net of NICO Coverage
 
(in millions of U.S. dollars)
A&E
 
 
Other
 
 
Total
 
 
 
Balance at December 31, 2011(1)

$
144

 

$
54

 

$
198

 

$
165

 

$
33

Incurred activity
 
22

 
 
(6
)
 
 
16

 
 
12

 
 
4

Paid activity
 
(15)

 
 
(4)

 
 
(19)

 
 
(19)

 
 
—

Balance at December 31, 2012

$
151

 

$
44

 

$
195

 

$
158

 
 
$
37

(1) 
Balances at December 31, 2011 have been adjusted to present claims in a manner consistent with balances disclosed at December 31, 2012.

The incurred activity of $4 million primarily relates to the internal review of consolidated A&E liabilities as discussed above.

Brandywine run-off entities
In addition to housing a significant portion of ACE's A&E exposure, the Brandywine operations include run-off liabilities related to various insurance and reinsurance businesses. ACE's Brandywine insurance companies are Century (a Pennsylvania insurer) and Century International Reinsurance Company Ltd., a Bermuda insurer (CIRC).  The Brandywine companies are direct or indirect subsidiaries of Brandywine Holdings.

The U.S.-based ACE INA companies assumed two contractual obligations in respect of the Brandywine operations in connection with the Restructuring: a dividend retention fund obligation and a surplus maintenance obligation in the form of the excess of loss (XOL) agreement.

INA Financial Corporation established and funded a dividend retention fund (the Dividend Retention Fund) consisting of $50 million plus investment earnings. Pursuant to an interpretation of the Brandywine Restructuring Order, the full balance of the Dividend Retention Fund was contributed to Century as of December 31, 2002. Under the Restructuring Order, while any obligation to maintain the Dividend Retention Fund is in effect, to the extent dividends are paid by INA Holdings Corporation to its parent, INA Financial Corporation, and to the extent INA Financial Corporation then pays such dividends to INA Corporation, a portion of those dividends must be withheld to replenish the principal of the Dividend Retention Fund to $50 million. During 2012 and 2011, nil and $35 million respectively, were withheld from such dividends and deposited in the Dividend Retention Fund by INA Financial Corporation. Effective January 28, 2011, the Pennsylvania Insurance Department clarified the scope of the Dividend Retention Fund that capital contributions from the Dividend Retention Fund to Century shall not be required until the XOL Agreement has less than $200 million of capacity remaining on an incurred basis for statutory reporting purposes. The amount of the capital contribution shall be the lesser of the amount necessary to restore the XOL Agreement remaining capacity to $200 million or the Dividend Retention Fund balance. The Dividend Retention Fund may not be terminated without prior written approval from the Pennsylvania Insurance Commissioner.

In addition, an ACE INA insurance subsidiary provided reinsurance coverage to Century in the amount of $800 million under an XOL, triggered if the statutory capital and surplus of Century falls below $25 million or if Century lacks liquid assets with which to pay claims as they become due.

Effective December 31, 2004, ACE INA Holdings contributed $100 million to Century in exchange for a surplus note. After giving effect to the contribution and issuance of the surplus note, the statutory surplus of Century at December 31, 2012 was $25 million and approximately $394 million in statutory-basis losses have been ceded to the XOL on an inception-to-date basis. Century reports the amount ceded under the XOL in accordance with statutory accounting principles, which differ from GAAP by, among other things, allowing Century to discount its liabilities, including certain asbestos related and environmental pollution liabilities. For GAAP reporting purposes, intercompany reinsurance recoverables related to the XOL are eliminated upon consolidation.

While ACE believes it has no legal obligation to fund losses above the XOL limit of coverage, ACE's consolidated results would nevertheless continue to include any losses above the limit of coverage for so long as the Brandywine companies remain consolidated subsidiaries of ACE.

Uncertainties relating to ACE's ultimate Brandywine exposure
In addition to the Dividend Retention Fund and XOL commitments described above, certain ACE entities are primarily liable for asbestos, environmental, and other exposures that they have reinsured to Century. Accordingly, if Century were to become insolvent and ACE were to lose control of Century, some or all of the recoverables due to these ACE companies from Century could become uncollectible, yet those ACE entities would continue to be responsible to pay claims to their insureds or reinsureds. At December 31, 2012 and 2011, the aggregate reinsurance balances ceded by the active ACE companies to Century were approximately $958 million and $877 million, respectively. At December 31, 2012 and 2011, Century's carried gross reserves (including reserves ceded by the active ACE companies to Century) were $2.1 billion and $2.4 billion, respectively. ACE believes the intercompany reinsurance recoverables, which relate to liabilities payable over many years (i.e., 25 years or more), are not impaired. A portion of the liabilities ceded to Century by its affiliates have, in turn, been ceded by Century to NICO and, at December 31, 2012 and 2011, remaining cover on a paid loss basis was approximately $18 million and $386 million, respectively. Should Century's loss reserves experience adverse development in the future and should Century be placed into rehabilitation or liquidation, the reinsurance recoverables due from Century to its affiliates would be payable only after the payment in full of certain expenses and liabilities, including administrative expenses and direct policy liabilities. Thus, the intercompany reinsurance recoverables would be at risk to the extent of the shortage of assets remaining to pay these recoverables. Losses ceded by Century to the active ACE companies and other amounts owed to Century by the active ACE companies were, in the aggregate, approximately $402 million and $171 million at December 31, 2012 and 2011, respectively.
Taxation
Taxation
Taxation

Under Swiss law, a resident company is subject to income tax at the federal, cantonal, and communal levels that is levied on net worldwide income. Income attributable to permanent establishments or real estate located abroad is excluded from the Swiss tax base. ACE Limited is a holding company and, therefore, is exempt from cantonal and communal income tax. As a result, ACE Limited is subject to Swiss income tax only at the federal level. Furthermore, participation relief (i.e., tax relief) is granted to ACE Limited at the federal level for qualifying dividend income and capital gains related to the sale of qualifying participations (i.e., subsidiaries). It is expected that the participation relief will result in a full exemption of participation income from federal income tax. ACE Limited is resident in the Canton and City of Zurich and, as such, is subject to an annual cantonal and communal capital tax on the taxable equity of ACE Limited in Switzerland.

ACE has two Swiss operating subsidiaries resident in the Canton and City of Zurich, an insurance company, ACE Insurance (Switzerland) Limited, which, in turn, owns a reinsurance company, ACE Reinsurance (Switzerland) Limited. Both are subject to federal, cantonal, and communal income tax and to annual cantonal and communal capital tax.

Under current Bermuda law, ACE Limited and its Bermuda subsidiaries are not required to pay any taxes on income or capital gains. If a Bermuda law were enacted that would impose taxes on income or capital gains, ACE Limited and the Bermuda subsidiaries have received an undertaking from the Minister of Finance in Bermuda that would exempt such companies from Bermudian taxation until March 2035.

Income from ACE's operations at Lloyd's is subject to United Kingdom corporation taxes. Lloyd's is required to pay U.S. income tax on U.S. connected income (U.S. income) written by Lloyd's syndicates. Lloyd's has a closing agreement with the Internal Revenue Service (IRS) whereby the amount of tax due on this business is calculated by Lloyd's and remitted directly to the IRS. These amounts are then charged to the accounts of the Names/Corporate Members in proportion to their participation in the relevant syndicates. ACE's Corporate Members are subject to this arrangement but, as U.K. domiciled companies, will receive U.K. corporation tax credits for any U.S. income tax incurred up to the value of the equivalent U.K. corporation income tax charge on the U.S. income.

ACE Group Holdings and its respective subsidiaries are subject to income taxes imposed by U.S. authorities and file a consolidated U.S. tax return. Combined Insurance and its subsidiaries will file a separate consolidated U.S. tax return for tax years prior to 2014. Should ACE Group Holdings pay a dividend to ACE, withholding taxes would apply. Currently, however, no withholding taxes are accrued with respect to such un-remitted earnings as management has no intention of remitting these earnings. Similarly, no taxes have been provided on the un-remitted earnings of certain foreign subsidiaries as management has no intention of remitting these earnings. The cumulative amount that would be subject to withholding tax, if distributed, as well as the determination of the associated tax liability are not practicable to compute; however, such amount would be material to ACE. Certain international operations of ACE are also subject to income taxes imposed by the jurisdictions in which they operate.

ACE is not subject to income taxation other than as stated above.  There can be no assurance that there will not be changes in applicable laws, regulations, or treaties which might require ACE to change the way it operates or become subject to taxation.

ACE's domestic operations are in Switzerland, the jurisdiction where we are legally organized, incorporated, and registered. Domestic operations for the years ended December 31, 2012, 2011, and 2010 are not considered significant to the consolidated income before income taxes for the respective periods.

The following table presents the provision for income taxes:
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

Current tax expense
$
305

 
$
485

 
$
443

Deferred tax expense (benefit)
(35
)
 
17

 
110

Provision for income taxes
$
270

 
$
502

 
$
553



The most significant jurisdictions contributing to the overall taxation of ACE are calculated using the following rates: Switzerland 7.83 percent, Bermuda 0.0 percent, U.S. 35.0 percent, and U.K. 24.5 percent. The following table presents a reconciliation of the difference between the provision for income taxes and the expected tax provision at the Swiss statutory income tax rate:
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

Expected tax provision at Swiss statutory tax rate
$
233

 
$
160

 
$
285

Permanent differences:
 
 
 
 
 
Taxes on earnings subject to rate other than Swiss statutory rate
129

 
323

 
327

Tax-exempt interest and dividends received deduction, net of proration
(24
)
 
(21
)
 
(20
)
Net withholding taxes
23

 
19

 
15

Favorable resolution of prior years' tax matters and closing statutes of limitations
(124
)
 
—

 
(21
)
Change in valuation allowance
4

 
(2
)
 
(3
)
Non-taxable acquisition gain
—

 
—

 
(61
)
Other
29

 
23

 
31

Total provision for income taxes
$
270

 
$
502

 
$
553



The following table presents the components of the net deferred tax assets:
 
December 31

 
December 31

(in millions of U.S. dollars)
2012

 
2011

Deferred tax assets:
 
 
 
Loss reserve discount
$
849

 
$
933

Unearned premiums reserve
98

 
85

Foreign tax credits
1,131

 
1,074

Investments
43

 
67

Provision for uncollectible balances
110

 
113

Loss carry-forwards
55

 
43

Other, net
110

 
31

Cumulative translation adjustment
—

 
5

Total deferred tax assets
2,396

 
2,351

Deferred tax liabilities:
 
 
 
Deferred policy acquisition costs
68

 
47

VOBA and other intangible assets
379

 
372

Un-remitted foreign earnings
795

 
810

Unrealized appreciation on investments
586

 
392

Cumulative translation adjustment
59

 
—

Total deferred tax liabilities
1,887

 
1,621

Valuation allowance
56

 
57

Net deferred tax assets
$
453

 
$
673



The valuation allowance of $56 million at December 31, 2012, and $57 million at December 31, 2011, reflects management's assessment, based on available information, that it is more likely than not that a portion of the deferred tax assets will not be realized due to the inability of certain foreign subsidiaries to generate sufficient taxable income and the inability of ACE Group Holdings and its subsidiaries to utilize foreign tax credits. Adjustments to the valuation allowance are made when there is a change in management's assessment of the amount of deferred tax assets that are realizable.

At December 31, 2012, ACE has net operating loss carry-forwards of $157 million which, if unutilized, will expire in the years 2013 through 2030, and a foreign tax credit carry-forward in the amount of $76 million which, if unutilized, will expire in the years 2015 through 2022.

The following table presents a reconciliation of the beginning and ending amount of unrecognized tax benefits:
 
December 31

 
December 31

(in millions of U.S. dollars)
2012

 
2011

Balance, beginning of year
$
134

 
$
139

Additions based on tax provisions related to the current year
19

 
1

Reductions for tax positions of prior years
—

 
(6
)
Reductions for settlements with tax authorities
(16
)
 
—

Reductions for the lapse of the applicable statutes of limitations
(111
)
 
—

Balance, end of year
$
26

 
$
134



Not included in the balance above at December 31, 2012 and 2011, is $18 million and $1 million, respectively, of unrecognized tax benefits for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, an unfavorable resolution of these temporary items would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. Consequently, the total amount of unrecognized tax benefits at December 31, 2012, that would affect the effective tax rate, if recognized, is $8 million.

ACE recognizes accruals for interest and penalties, if any, related to unrecognized tax benefits in income tax expense in the consolidated statements of operations. Tax-related interest expense (income) and penalties reported in the consolidated statements of operations for the years ended December 31, 2012, 2011, and 2010 were $(8) million, $3 million, and $(1) million, respectively. At December 31, 2012 and 2011, ACE recorded $12 million and $22 million, respectively, in liabilities for tax-related interest and penalties in our consolidated balance sheets.

In 2010, ACE reached final settlement with the IRS Appeals Division (Appeals) regarding its federal tax returns for 2002, 2003, and 2004. As a result of the settlement, the amount of unrecognized tax benefits including interest was reduced by approximately $21 million. In 2012, ACE reached final settlement with Appeals regarding several issues raised by the IRS Examination Division in its federal tax returns for 2005, 2006, and 2007. The settlement of these issues had no net impact on our results of operations. During 2012, the IRS completed its field examination of ACE’s federal tax returns for 2008 and 2009. No material adjustments resulted from this examination. During 2012, ACE recognized a $124 million benefit resulting from the favorable resolution of various prior years' tax matters and the closing of statutes of limitations. It is reasonably possible that over the next twelve months, the amount of unrecognized tax benefits may change resulting from the re-evaluation of unrecognized tax benefits arising from examinations of taxing authorities and the closing of tax statutes of limitations. With few exceptions, ACE is no longer subject to state and local or non-U.S. income tax examinations for years before 2005.
Debt
Debt
Debt

Debt outstanding consisted of the following:
 
December 31

 
December 31

(in millions of U.S. dollars)
2012

 
2011

Short-term debt
 
 
 
Reverse repurchase agreements
$
1,401

 
$
1,251

Long-term debt
 
 
 
ACE INA senior notes due 2014
$
500

 
$
500

ACE INA senior notes due 2015
449

 
449

ACE INA senior notes due 2015
699

 
699

ACE INA senior notes due 2017
500

 
500

ACE INA senior notes due 2018
300

 
300

ACE INA senior notes due 2019
500

 
500

ACE INA debentures due 2029
100

 
100

ACE INA senior notes due 2036
299

 
299

Other
13

 
13

 
$
3,360

 
$
3,360

Trust Preferred Securities
 
 
 
ACE INA capital securities due 2030
$
309

 
$
309



a) Short-term debt
ACE has executed reverse repurchase agreements with certain counterparties under which ACE agreed to sell securities and repurchase them at a future date for a predetermined price. At December 31, 2012, there were $1.4 billion of reverse repurchase agreements outstanding with a weighted average interest rate of 0.40 percent.

b) ACE INA notes and debentures
In June 2004, ACE INA issued $500 million of 5.875 percent senior notes due June 2014. These notes are redeemable at any time at ACE INA's option subject to a “make-whole” premium plus 0.20 percent. The notes are also redeemable at par plus accrued and unpaid interest in the event of certain changes in tax law. The notes do not have the benefit of any sinking fund. These senior unsecured notes are guaranteed on a senior basis by ACE Limited and they rank equally with all of ACE's other senior obligations. They also contain customary limitations on lien provisions as well as customary events of default provisions which, if breached, could result in the accelerated maturity of such senior debt.

In May 2008, ACE INA issued $450 million of 5.6 percent senior notes due May 2015. These notes are redeemable at any time at ACE INA's option subject to a “make-whole” premium plus 0.35 percent. The notes are also redeemable at par plus accrued and unpaid interest in the event of certain changes in tax law. The notes do not have the benefit of any sinking fund. These senior unsecured notes are guaranteed on a senior basis by ACE Limited and they rank equally with all of ACE's other senior obligations. They also contain customary limitations on lien provisions as well as customary events of default provisions which, if breached, could result in the accelerated maturity of such senior debt.

In November 2010, ACE INA issued $700 million of 2.6 percent senior notes due November 2015. These notes are redeemable at any time at ACE INA's option subject to a “make-whole” premium plus 0.20 percent. The notes are also redeemable at par plus accrued and unpaid interest in the event of certain changes in tax law. The notes do not have the benefit of any sinking fund. These senior unsecured notes are guaranteed on a senior basis by ACE Limited and they rank equally with all of ACE's other senior obligations. They also contain customary limitations on lien provisions as well as customary events of default provisions which, if breached, could result in the accelerated maturity of such senior debt.

In February 2007, ACE INA issued $500 million of 5.7 percent senior notes due February 2017. These notes are redeemable at any time at ACE INA's option subject to a “make-whole” premium plus 0.20 percent. The notes are also redeemable at par plus accrued and unpaid interest in the event of certain changes in tax law. These notes do not have the benefit of any sinking fund.  These senior unsecured notes are guaranteed on a senior basis by ACE Limited and they rank equally with all of ACE's other senior obligations.  They also contain customary limitations on lien provisions as well as customary events of default provisions which, if breached, could result in the accelerated maturity of such senior debt.

In February 2008, ACE INA issued $300 million of 5.8 percent senior notes due March 2018.  These notes are redeemable at any time at ACE INA's option subject to a “make-whole” premium plus 0.35 percent. The notes are also redeemable at par plus accrued and unpaid interest in the event of certain changes in tax law. These notes do not have the benefit of any sinking fund.  These senior unsecured notes are guaranteed on a senior basis by ACE Limited and they rank equally with all of ACE's other senior obligations.  They also contain customary limitations on lien provisions as well as customary events of default provisions which, if breached, could result in the accelerated maturity of such senior debt.

In June 2009, ACE INA issued $500 million of 5.9 percent senior notes due June 2019. These notes are redeemable at any time at ACE INA's option subject to a “make-whole” premium plus 0.40 percent. The notes are also redeemable at par plus accrued and unpaid interest in the event of certain changes in tax law. The notes do not have the benefit of any sinking fund. These senior unsecured notes are guaranteed on a senior basis by ACE Limited and they rank equally with all of ACE's other senior obligations. They also contain customary limitations on lien provisions as well as customary events of default provisions which, if breached, could result in the accelerated maturity of such senior debt.

In August 1999, ACE INA issued $100 million of 8.875 percent debentures due August 2029.  Subject to certain exceptions, the debentures are not redeemable before maturity and do not have the benefit of any sinking fund.  These unsecured debentures are guaranteed on a senior basis by ACE Limited and they rank equally with all of ACE INA's other senior indebtedness. They also contain customary limitations on lien provisions as well as customary events of default provisions which, if breached, could result in the accelerated maturity of such senior debt.

In May 2006, ACE INA issued $300 million of 6.7 percent notes due May 2036. These notes are redeemable at any time at ACE INA's option subject to a “make-whole” premium plus 0.20 percent. The notes are also redeemable at par plus accrued and unpaid interest in the event of certain changes in tax law. These notes do not have the benefit of any sinking fund. These senior unsecured notes are guaranteed on a senior basis by ACE Limited and they rank equally with all of ACE's other senior obligations. They also contain customary limitations on lien provisions as well as customary events of default provisions which, if breached, could result in the accelerated maturity of such senior debt.

c) Other long-term debt
In August 2005, ACE American borrowed $10 million from the Pennsylvania Industrial Development Authority (PIDA) at a rate of 2.75 percent due September 2020.  The proceeds from PIDA were restricted for purposes of defraying construction costs of a new office building.   Principal and interest are payable on a monthly basis. The current balance outstanding is $6 million.

In addition, in 1999, ACE American assumed a CIGNA loan of $8 million borrowed from the City of Philadelphia under the Urban Development Action Grant with an imputed rate of 7.1 percent due December 2019. The current amount outstanding is $7 million.

d) ACE INA capital securities
In March 2000, ACE Capital Trust II, a Delaware statutory business trust, publicly issued $300 million of 9.7 percent Capital Securities (the Capital Securities). At the same time, ACE INA purchased $9.2 million of common securities of ACE Capital Trust II.

The Capital Securities mature in April 2030. Distributions on the Capital Securities are payable semi-annually. ACE Capital Trust II may defer these payments for up to ten consecutive semi-annual periods (but no later than April 1, 2030). Any deferred payments would accrue interest compounded semi-annually if ACE INA defers interest on the Subordinated Debentures due 2030 (as defined below).

The sole assets of ACE Capital Trust II consist of $309 million principal amount of 9.7 percent Junior Subordinated Deferrable Interest Debentures (the Subordinated Debentures) issued by ACE INA. The Subordinated Debentures mature in April 2030. Interest on the Subordinated Debentures is payable semi-annually. ACE INA may defer such interest payments (but no later than April 1, 2030), with such deferred payments accruing interest compounded semi-annually. ACE INA may redeem the Subordinated Debentures in the event certain changes in tax or investment company law occur at a redemption price equal to accrued and unpaid interest to the redemption date plus the greater of (i) 100 percent of the principal amount thereof, or (ii) the sum of the present value of scheduled payments of principal and interest on the debentures from the redemption date to April 1, 2030. The Capital Securities and the ACE Capital Trust II Common Securities will be redeemed upon repayment of the Subordinated Debentures.

ACE Limited has guaranteed, on a subordinated basis, ACE INA's obligations under the Subordinated Debentures, and distributions and other payments due on the Capital Securities. These guarantees, when taken together with ACE's obligations under expense agreements entered into with ACE Capital Trust II, provide a full and unconditional guarantee of amounts due on the Capital Securities.
Commitments, contingencies, and guarantees
Commitments, contingencies, and guarantees
Commitments, contingencies, and guarantees

a) Derivative instruments
Derivative instruments employed
ACE maintains positions in derivative instruments such as futures, options, swaps, and foreign currency forward contracts for which the primary purposes are to manage duration and foreign currency exposure, yield enhancement, or to obtain an exposure to a particular financial market. Along with convertible bonds and to be announced mortgage-backed securities (TBA), discussed below, these are the most numerous and frequent derivative transactions.
ACE maintains positions in convertible bond investments that contain embedded derivatives. In addition, ACE, from time to time, purchases TBAs as part of its investing activities. These securities are included within the fixed maturities available for sale (FM AFS) portfolio. At December 31, 2012, ACE had no positions in TBAs.
Under reinsurance programs covering GLBs, ACE assumes the risk of GLBs, including GMIB and GMAB, associated with variable annuity contracts. The GMIB risk is triggered if, at the time the contract holder elects to convert the accumulated account value to a periodic payment stream (annuitize), the accumulated account value is not sufficient to provide a guaranteed minimum level of monthly income. The GMAB risk is triggered if, at contract maturity, the contract holder’s account value is less than a guaranteed minimum value. The GLB reinsurance product meets the definition of a derivative instrument. Benefit reserves in respect of GLBs are classified as Future policy benefits (FPB) while the fair value derivative adjustment is classified within Accounts payable, accrued expenses, and other liabilities (AP). ACE also maintains positions in exchange-traded equity futures contracts and options on equity market indices to limit equity exposure in the GMDB and GLB blocks of business.
In relation to certain debt issuances, ACE, from time to time, enters into interest rate swap transactions for the purpose of either fixing or reducing borrowing costs. Although the use of these interest rate swaps has the economic effect of fixing or reducing borrowing costs on a net basis, gross interest expense on the related debt issuances is included in Interest expense while the settlements related to the interest rate swaps are reflected in Net realized gains (losses) in the consolidated statements of operations. At December 31, 2012, ACE had no in-force interest rate swaps.
ACE, from time to time, buys credit default swaps to mitigate global credit risk exposure, primarily related to reinsurance recoverables. At December 31, 2012, ACE had no in-force credit default swaps.
All derivative instruments are carried at fair value with changes in fair value recorded in Net realized gains (losses) in the consolidated statements of operations. None of the derivative instruments are designated as hedges for accounting purposes.

The following table presents the balance sheet locations, fair values in an asset or (liability) position, and notional values/payment provisions of our derivative instruments: 
 
 
 
December 31
 
 
December 31
 
 
 
 
 

2012

 
2011
 
(in millions of U.S. dollars)
Consolidated
Balance Sheet
Location
 
Fair Value

 
Notional
Value/
Payment
Provision

 
Fair Value

 
Notional
Value/
Payment
Provision

Investment and embedded derivative instruments
 
 
 
 
 
 
 
 
 
Foreign currency forward contracts
AP
 
$
—

 
$
620

 
$
7

 
$
674

Cross-currency swaps
AP
 
—

 
50

 
—

 
—

Futures contracts on money market instruments
AP
 
1

 
2,710

 
7

 
10,476

Futures contracts on notes and bonds
AP
 
10

 
915

 
(4
)
 
1,055

Options on money market instruments
AP
 
—

 
—

 
—

 
292

Convertible bonds
FM AFS
 
309

 
279

 
357

 
353

TBAs
FM AFS
 
—

 
—

 
60

 
56

 
 
 
$
320

 
$
4,574

 
$
427

 
$
12,906

Other derivative instruments
 
 
 
 
 
 
 
 
 
Futures contracts on equities(1)
AP
 
$
(6
)
 
$
2,308

 
$
(16
)
 
$
1,367

Options on equity market indices(1)
AP
 
30

 
250

 
54

 
250

Credit default swaps
AP
 
—

 
—

 
3

 
350

Other
AP
 
—

 
—

 
—

 
6

 
 
 
$
24

 
$
2,558

 
$
41

 
$
1,973

GLB(2)
AP/FPB
 
$
(1,352
)
 
$
1,100

 
$
(1,505
)
 
$
1,378

(1) 
Related to GMDB and GLB blocks of business.
(2) 
Includes both future policy benefits reserves and fair value derivative adjustment. Refer to Note 5 c) for additional information. Note that the payment provision related to GLB is the net amount at risk. The concept of a notional value does not apply to the GLB reinsurance contracts.
The following table presents net realized gains (losses) related to derivative instrument activity in the consolidated statements of operations:
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

Investment and embedded derivative instruments
 
 
 
 
 
Foreign currency forward contracts
$
(9
)
 
$
6

 
$
21

All other futures contracts and options
(22
)
 
(98
)
 
29

Convertible bonds
25

 
(50
)
 
7

TBAs
—

 
(1
)
 
1

Total investment and embedded derivative instruments
$
(6
)
 
$
(143
)
 
$
58

GLB and other derivative instruments
 
 
 
 
 
GLB(1)
$
171

 
$
(779
)
 
$
(28
)
Futures contracts on equities(2)
(273
)
 
(12
)
 
(140
)
Options on equity market indices(2)
(24
)
 
8

 
(10
)
Interest rate swaps
—

 
—

 
(21
)
Credit default swaps
(4
)
 
(4
)
 
1

Other
—

 
—

 
1

Total GLB and other derivative instruments
$
(130
)
 
$
(787
)
 
$
(197
)
 
$
(136
)
 
$
(930
)
 
$
(139
)
(1) 
Excludes foreign exchange gains (losses) related to GLB.
(2) 
Related to GMDB and GLB blocks of business. 
Derivative instrument objectives

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

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

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

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

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

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

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

Interest rate swaps
We use interest rate swaps related to certain debt issuances for the purpose of either fixing and/or reducing borrowing costs.

Credit default swaps
A credit default swap is a bilateral contract under which two counterparties agree to isolate and separately trade the credit risk of at least one third-party reference entity. Under a credit default swap agreement, ACE as a protection buyer pays a periodic fee to a protection seller in exchange for a contingent payment by the seller upon a credit event (such as a default or failure to pay) related to the reference entity. When a credit event is triggered, the protection seller pays the protection buyer the difference between the fair value of assets and the principal amount.

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

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

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

b) Concentrations of credit risk
Our investment portfolio is managed following prudent standards of diversification. Specific provisions limit the allowable holdings of a single issue and issuer. We believe that there are no significant concentrations of credit risk associated with our investments. Our three largest exposures by issuer at December 31, 2012, were JP Morgan Chase & Co., General Electric Company, and Goldman Sachs Group Inc. Our largest exposure by industry at December 31, 2012 was financial services.

We market our insurance and reinsurance worldwide primarily through insurance and reinsurance brokers. We assume a degree of credit risk associated with brokers with whom we transact business. During the years ended December 31, 2012, and both 2011 and 2010, approximately 11 percent and 12 percent, respectively, of our gross premiums written were generated from or placed by Marsh, Inc. This entity is a large, well established company and there are no indications that it is financially troubled at December 31, 2012. During the years ended December 31, 2011 and 2010, approximately 10 percent of our gross premiums written were generated from or placed by Aon Corporation and its affiliates. No other broker and no one insured or reinsured accounted for more than 10 percent of gross premiums written in the years ended December 31, 2012, 2011, and 2010.

c) Other investments
At December 31, 2012, included in Other investments in the consolidated balance sheet are investments in limited partnerships and partially-owned investment companies with a carrying value of $1.7 billion. In connection with these investments, we have commitments that may require funding of up to $1.2 billion over the next several years. 

d) Letters of credit
We have a $1.0 billion unsecured operational LOC facility (adjustable to $1.5 billion upon consent of the issuers) expiring in November 2017. We are allowed to utilize up to $300 million of this LOC facility as an unsecured revolving credit facility. This facility replaces the $1.0 billion syndicated letter of credit facility and $500 million unsecured revolving credit facility that expired in November 2012.   At December 31, 2012, outstanding LOCs issued under this facility were $619 million. We also have a $500 million unsecured operational LOC facility expiring in June 2014. At December 31, 2012, this facility was fully utilized.

To satisfy funding requirements of ACE's Lloyd's Syndicate 2488 through 2013, we have a series of four bilateral uncollateralized LOC facilities totaling $425 million. LOCs issued under these facilities will expire no earlier than December 2017. At December 31, 2012, $400 million of this facility was utilized.

These facilities require that ACE Limited and/or certain of its subsidiaries continue to maintain certain covenants. ACE Limited is also required to maintain a minimum consolidated net worth covenant and a maximum leverage covenant, which have been met at December 31, 2012.

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

(ii) Business practices litigation
ACE Limited, ACE INA Holdings Inc., and ACE USA, Inc., along with a number of other insurers and brokers, were named in a series of federal putative nationwide class actions brought by insurance policyholders. The Judicial Panel on Multidistrict Litigation (JPML) consolidated these cases in the District of New Jersey. On August 1, 2005, plaintiffs in the New Jersey consolidated proceedings filed two consolidated amended complaints - one concerning commercial insurance and the other concerning employee benefit plans. The employee benefit plans litigation against ACE Limited and certain subsidiaries has been dismissed.

In the commercial insurance complaint, the plaintiffs named ACE Limited, ACE INA Holdings Inc., ACE USA, Inc., ACE American Insurance Co., Illinois Union Insurance Co., and Indemnity Insurance Co. of North America. They allege that certain brokers and insurers, including certain ACE entities, conspired to increase premiums and allocate customers through the use of “B” quotes and contingent commissions. In addition, they allege that the broker defendants received additional income by improperly placing their clients’ business with insurers through related wholesale entities that acted as intermediaries between brokers and insurers. Plaintiffs also allege that broker defendants tied the purchase of primary insurance to the placement of such coverage with reinsurance carriers through the broker defendants’ reinsurance broker subsidiaries. The complaint asserts the following causes of action against the ACE defendants: Federal Racketeer Influenced and Corrupt Organizations Act (RICO), federal antitrust law, state antitrust law, aiding and abetting breach of fiduciary duty, and unjust enrichment.
In 2006 and 2007, the Court dismissed plaintiffs’ first two attempts to properly plead a case without prejudice and permitted plaintiffs one final opportunity to re-plead. The amended complaint, filed on May 22, 2007, purported to add several new ACE defendants: ACE Group Holdings, Inc., ACE US Holdings, Inc., Westchester Fire Insurance Company, INA Corporation, INA Financial Corporation, INA Holdings Corporation, ACE Property and Casualty Insurance Company, and Pacific Employers Insurance Company. Plaintiffs also added a new antitrust claim against Marsh, the ACE defendants, and other insurers based on the same allegations as the other claims but limited to excess casualty insurance. In 2007, the Court granted defendants’ motions to dismiss plaintiffs’ antitrust and RICO claims with prejudice. The Court also declined to exercise supplemental jurisdiction over plaintiffs’ state law claims and dismissed those claims without prejudice. Plaintiffs appealed to the United States Court of Appeals for the Third Circuit. On August 16, 2010, the Third Circuit affirmed, in part, and vacated, in part, the District Court’s previous dismissals with instructions for further briefing at the District Court on remand. Defendants renewed their motions consistent with the Third Circuit’s instructions. On June 28, 2011 the District Court administratively terminated defendants’ motions without prejudice to re-file after adjudication of issues related to a proposed class settlement involving a number of other parties and stayed the case. On October 17, 2011, the Court lifted the stay and, shortly thereafter, entered an order permitting defendants to re-file their motions to dismiss.  Defendants did so on October 21, 2011.  On April 30, 2012 the Court entered a discovery scheduling order.  On May 31, 2012, the Court once again administratively terminated defendants' motions to dismiss.  On September 25, 2012, at defendants' urging, the Court ordered that the defendants' motions to dismiss would be reinstated.
On January 11, 2013, ACE reached a settlement in principle with the class action commercial plaintiffs for $4.2 million. If approved by the Court, this would end ACE's involvement in the class action lawsuit.
There are a number of additional federal actions brought by policyholders based on allegations similar to the allegations in the consolidated federal actions that were filed in, or transferred to, the United States District Court for the District of New Jersey for coordination (“tag-along cases”). On October 17, 2011 the Court lifted the stay in those matters, and on April 30, 2012 the Court entered a discovery scheduling order.  On September 25, 2012, at defendants' urging, the Court ordered the tag-along plaintiffs to file their final complaints.  The tag-along defendants served motions to dismiss or to compel arbitration on December 4, 2012 and December 21, 2012, respectively. The plaintiffs are required to file opposition briefs to the motions to dismiss on March 25, 2013 and to the motions to compel on March 3, 2013. The defendants reply briefs on the motions to dismiss are due on April 16, 2013 and for the motions to compel on March 23, 2013. Discovery is ongoing.
•
New Cingular Wireless Headquarters LLC et al. v. Marsh & McLennan Companies, Inc. et al. (Case No. 06-5120; D.N.J.), was originally filed in the Northern District of Georgia on April 4, 2006. ACE Limited, ACE American Ins. Co., ACE USA, Inc., ACE Bermuda Insurance Ltd., Illinois Union Ins. Co., Pacific Employers Ins. Co., and Lloyd’s of London Syndicate 2488 AGM, along with a number of other insurers and brokers, are named.
•
Avery Dennison Corp. v. Marsh & McLennan Companies, Inc. et al. (Case No. 07-00757; D.N.J.) was filed on February 13, 2007. ACE Limited, ACE INA Holdings Inc., ACE USA, Inc., and ACE American Insurance Co., along with a number of other insurers and brokers, are named. On February 22, 2013, ACE reached a confidential settlement in principle with Avery Dennison Corp. Once the agreement is finalized, this lawsuit will be dismissed with prejudice.
•
Henley Management Co., Inc. et al. v. Marsh, Inc. et al. (Case No. 07-2389; D.N.J.) was filed on May 27, 2007. ACE USA, Inc., along with a number of other insurers and Marsh, Inc., are named.
•
Sears, Roebuck & Co. et al. v. Marsh & McLennan Companies, Inc. et al. (Case No. 07-2535; D.N.J.) was originally filed in the Northern District of Georgia on October 12, 2007. ACE American Insurance Co., ACE Bermuda Insurance Ltd., and Westchester Surplus Lines Insurance Co., along with a number of other insurers and brokers, are named.
•
Lincoln Adventures LLC et al. v. Those Certain Underwriters at Lloyd’s, London Members of Syndicates 0033 et al. (Case No. 07-60991; D.N.J.) was originally filed in the Southern District of Florida on July 13, 2007. Supreme Auto Transport LLC et al. v. Certain Underwriters of Lloyd’s of London, et al. (Case No. 07-6703; D.N.J.) (Supreme Auto) was originally filed in the Southern District of New York on July 25, 2007. Lloyd’s of London Syndicate 2488 AGM, along with a number of other Lloyd’s of London Syndicates and various brokers, are named in both actions. The allegations in these putative class-action lawsuits are similar to the allegations in the consolidated federal actions identified above, although these lawsuits focus on alleged conduct within the London insurance market. On May 29, 2012 the Supreme Auto case was voluntarily dismissed without prejudice by the plaintiffs.
As of February 27, 2013, plaintiffs have not specified an amount of alleged damages in any of the remaining tag-along cases. The proceedings in the tag-along cases were stayed at a very early stage, before the ACE defendants could challenge the sufficiency of the claims with, for example, motions to dismiss. Also, the scope of the tag-along cases, in large part, will be affected by the outcome of the Court's decision on defendants' motions to dismiss. As a result, ACE is unable to reasonably estimate the potential loss or range of losses, if any, arising from these litigations.
In addition to the related federal cases, there is one pending state case with allegations similar to those in the consolidated federal actions described above:
•
Van Emden Management Corporation v. Marsh & McLennan Companies, Inc., et al. (Case No. 05-0066A; Superior Court of Massachusetts), a class action in Massachusetts, was filed on January 13, 2005. Illinois Union Insurance Company is named. The Van Emden case has been stayed pending resolution of the consolidated proceedings in the District of New Jersey or until further order of the Court.
As of February 27, 2013, plaintiffs have not specified an amount of alleged damages in this case. The proceedings were stayed at a very early stage, before Illinois Union could challenge the sufficiency of the claims with, for example, a motion to dismiss. As a result, ACE is unable to reasonably estimate the potential loss or range of losses, if any, arising from this litigation.
In all of the lawsuits described above, except where specifically noted, plaintiffs seek compensatory and in some cases special damages without specifying an amount. As a result, ACE cannot at this time estimate its potential costs related to these legal matters and, accordingly, no liability for compensatory damages has been established in the consolidated financial statements.

In the opinion of management, our ultimate liability for these matters could be, but we believe is not likely to be, material to our consolidated financial condition and results of operations.

f) Lease commitments
We lease office space and equipment in the countries in which we operate under operating leases which expire at various dates through 2033. We renew and enter into new leases in the ordinary course of business as required. Total rent expense with respect to these operating leases was $112 million, $114 million, and $83 million for the years ended December 31, 2012, 2011, and 2010, respectively. Future minimum lease payments under the leases are expected to be as follows:
For the year ending December 31
(in millions of U.S. dollars)
2013
$
91

2014
79

2015
69

2016
60

2017
51

Thereafter
151

Total minimum future lease commitments
$
501

Shareholders' equity
Shareholders' equity
Shareholders’ equity

a) Common Shares
All of ACE’s Common Shares are authorized under Swiss corporate law. Though the par value of Common Shares is stated in Swiss francs, ACE continues to use U.S. dollars as its reporting currency for preparing the consolidated financial statements. Under Swiss corporate law, we may not generally issue Common Shares below their par value. In the event there is a need to raise common equity at a time when the trading price of ACE's Common Shares is below par value, we will obtain shareholder approval to decrease the par value of the Common Shares.

Under Swiss corporate law, dividends, including distributions through a reduction in par value (par value reduction), must be stated in Swiss francs though dividend payments are made by ACE in U.S. dollars. Dividend distributions following ACE's redomestication to Switzerland in July 2008 through March 2011 were paid in the form of a par value reduction (under the methods approved by our shareholders at our Annual General Meetings) and had the effect of reducing par value per Common Share each time a dividend was distributed. In light of a January 1, 2011 Swiss tax law change, shareholders at our May 2011 Annual General Meeting approved a dividend for the following year from capital contribution reserves (Additional paid-in capital), a subaccount of legal reserves.

In November 2011, the Board recommended that our shareholders approve a resolution to increase our quarterly dividend from $0.35 per share to $0.47 per share for the payment made on January 31, 2012 and the payment made on April 20, 2012. This proposed increase was approved by our shareholders at the January 9, 2012 Extraordinary General Meeting.

At our May 2012 annual general meeting, our shareholders approved a dividend for the following year, payable in four quarterly installments after the May 2012 annual general meeting in the form of a distribution by way of a par value reduction. We have determined this procedure is more appropriate for us at this time due to current Swiss law.

b) Shares issued, outstanding, authorized, and conditional
The following table presents a roll-forward of changes in Common Shares issued and outstanding:
 
Years Ended December 31
 
 
2012

2011

2010

Shares issued, beginning of year
342,832,412

341,094,559

337,841,616

Shares issued, net
—

—

2,268,000

Exercise of stock options
—

1,737,853

984,943

Shares issued, end of year
342,832,412

342,832,412

341,094,559

Common Shares in treasury, end of year
(2,510,878
)
(5,905,136
)
(6,151,707
)
Shares issued and outstanding, end of year
340,321,534

336,927,276

334,942,852

Common Shares issued to employee trust
 
 
 
Balance, beginning of year
(9,467
)
(101,481
)
(101,481
)
Shares redeemed
—

92,014

—

Balance, end of year
(9,467
)
(9,467
)
(101,481
)


Prior to August 2011, exercises of stock options were satisfied through newly issued shares. From August 2011 onward, exercises of stock options were satisfied through Common shares in treasury. Other decreases in Common Shares in treasury are principally due to grants of restricted stock, and purchases under the Employee Stock Purchase Plan (ESPP). Increases in Common Shares in treasury are due to open market repurchases of Common Shares and the surrender of Common Shares to satisfy tax withholding obligations in connection with the vesting of restricted stock and the forfeiture of unvested restricted stock.

For the years ended December 2012, 2011, and 2010, ACE repurchased 100,000 Common Shares, 2,058,860 Common Shares, and 4,926,082 Common Shares in a series of open market transactions, respectively. The cost of these shares, which were placed in treasury, totaled $7 million, $132 million, and $303 million for the years ended December 31, 2012, 2011, and 2010, respectively. ACE repurchased these Common Shares to partially offset potential dilution from the exercise of stock options and the granting of restricted stock under share-based compensation plans.

At December 31, 2012, and 2011, 2,510,878 Common Shares and 5,905,136 Common Shares, respectively, remain in treasury after net shares redeemed under employee share-based compensation plans. Common Shares held in treasury are accounted for at cost.

Common Shares issued to employee trust are issued by ACE to a rabbi trust for deferred compensation obligations as discussed in Note 11 f) below.

Authorized share capital for general purposes
The ACE Limited Board of Directors (Board) has shareholder-approved authority as set forth in the Articles of Association to increase for general purposes ACE's share capital from time to time through May 16, 2014, by the issuance of up to 140,000,000 fully paid up Common Shares, with a par value equal to the par value of ACE's Common Shares as set forth in the Articles of Association at the time of any such issuance.

Conditional share capital for bonds and similar debt instruments
The share capital of ACE may be increased through the issuance of a maximum of 33,000,000 fully paid up Common Shares with a par value of CHF 28.89 each through the exercise of conversion and/or option or warrant rights granted in connection with bonds, notes, or similar instruments, issued or to be issued by ACE, including convertible debt instruments.

Conditional share capital for employee benefit plans
The share capital of ACE may be increased through the issuance of a maximum of 25,410,929 fully paid up Common Shares with a par value of CHF 28.89 each in connection with the exercise of option rights granted to any employee of ACE, and any consultant, director, or other person providing services to ACE.

c) ACE Limited securities repurchase authorization
In August 2011, the Board of Directors authorized the repurchase of up to $303 million of ACE’s Common Shares through December 31, 2012.  The amount authorized in August 2011 was in addition to the $197 million balance remaining under a $600 million share repurchase program approved in November 2010. In November 2012, the Board of Directors authorized an extension through December 31, 2013. These authorizations were granted to allow ACE to repurchase Common Shares to partially offset potential dilution from the exercise of stock options and the granting of restricted stock under share-based compensation plans. Such repurchases may be made in the open market, in privately negotiated transactions, block trades, accelerated repurchases and/or through option or other forward transactions. At December 31, 2012, $461 million in share repurchase authorizations remained through December 31, 2013 pursuant to the November 2010, August 2011, and November 2012 Board authorizations. For the period January 1, 2013 through February 27, 2013, we repurchased 1,746,123 Common Shares for a total of $149 million in a series of open market transactions. As of February 27, 2013, $312 million in share repurchase authorizations remained through December 31, 2013.

d) General restrictions
The holders of the Common Shares are entitled to receive dividends as proposed by the Board and approved by the shareholders. Holders of Common Shares are allowed one vote per share provided that, if the controlled shares of any shareholder constitute ten percent or more of the outstanding Common Shares of ACE, only a fraction of the vote will be allowed so as not to exceed ten percent. Entry of acquirers of Common Shares as shareholders with voting rights in the share register may be refused if it would confer voting rights with respect to ten percent or more of the registered share capital recorded in the commercial register.

e) Dividends
As discussed above, dividend distributions on Common Shares following ACE's redomestication to Switzerland in July 2008 through March 31, 2011 were paid as a par value reduction while subsequent dividend distributions were funded from capital contribution reserves (Additional paid-in capital) and paid out of free reserves (Retained earnings) under the method approved by our shareholders at the May 2011 Annual General Meeting. At our May 2012 annual general meeting, our shareholders approved a dividend for the following year, payable in four quarterly installments after the May 2012 annual general meeting in the form of a distribution by way of a par value reduction. We have determined this procedure is more appropriate for us at this time due to current Swiss law. Dividend distributions on Common Shares amounted to CHF 1.91 ($2.06) per Common Share (including par value reductions of CHF 1.38 per Common Share), CHF 1.22 ($1.38) per Common Share (including a par value reduction of CHF 0.30 per Common Share), and CHF 1.31 ($1.30) per Common Share for the years ended December 31, 2012, 2011, and 2010, respectively. Par value reductions have been reflected as such through Common Shares in the consolidated statements of shareholders' equity. The par value per Common Share at December 31, 2012, stands at CHF 28.89.

f) Deferred compensation obligation
ACE maintains rabbi trusts for deferred compensation plans principally for employees and former directors. The shares issued by ACE to the rabbi trusts in connection with deferrals of share compensation are classified in shareholders' equity and accounted for at historical cost in a manner similar to Common Shares in treasury. These shares are recorded in Common Shares issued to employee trust and the obligations are recorded in Deferred compensation obligation in the consolidated balance sheets. Changes in the fair value of the shares underlying the obligations are recorded in Accounts payable, accrued expenses, and other liabilities in the consolidated balance sheets and the related expense or income is recorded in Administrative expenses in the consolidated statements of operations.

The rabbi trusts also hold other assets, such as fixed maturities, equity securities, and life insurance policies. The assets of the rabbi trusts are consolidated with ACE's assets and reflected in Other investments in the consolidated balance sheets. Except for life insurance policies which are reflected at cash surrender value, these assets are classified as trading securities and reported at fair value with changes in fair value reflected in Other (income) expense in the consolidated statements of operations. Except for obligations related to life insurance policies which are carried at cash surrender value, the related deferred compensation obligation is carried at fair value and included in Accounts payable, accrued expenses, and other liabilities in the consolidated balance sheets with changes reflected as a corresponding increase or decrease to Other (income) expense in the consolidated statements of operations.
Share-based compensation
Share-based compensation
Share-based compensation

ACE has share-based compensation plans which currently provide for awards of stock options, restricted stock, and restricted stock units to its employees and members of the Board.

ACE principally issues restricted stock grants and stock options on a graded vesting schedule. ACE recognizes compensation cost for restricted stock and stock option grants with only service conditions that have a graded vesting schedule on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards. We incorporate an estimate of future forfeitures into the determination of compensation cost for both grants of restricted stock and stock options.

During 2004, we established the ACE Limited 2004 Long-Term Incentive Plan (the 2004 LTIP), which replaced our prior incentive plans except for outstanding awards. The 2004 LTIP will continue in effect until terminated by the Board. Under the 2004 LTIP, a total of 30,600,000 Common Shares of ACE are authorized to be issued pursuant to awards made as stock options, stock appreciation rights, performance shares, performance units, restricted stock, and restricted stock units. The maximum number of shares that may be delivered to participants and their beneficiaries under the 2004 LTIP shall be equal to the sum of: (i) 30,600,000 shares; and (ii) any shares that are represented by awards granted under the prior plans that are forfeited, expired, or are canceled after the effective date of the 2004 LTIP, without delivery of shares or which result in the forfeiture of the shares back to ACE to the extent that such shares would have been added back to the reserve under the terms of the applicable prior plan. At December 31, 2012, a total of 6,593,991 shares remain available for future issuance under this plan.

The 2004 LTIP also provides for grants of restricted stock and restricted stock units. ACE generally grants restricted stock and restricted stock units with a 4-year vesting period, based on a graded vesting schedule. The restricted stock is granted at market close price on the day of grant. Each restricted stock unit represents our obligation to deliver to the holder one Common Share upon vesting.

At our May 2012 Annual General Meeting, our shareholders approved a 1,500,000 increase to the maximum number of authorized shares to be issued under the ESPP under the 2004 LTIP. At December 31, 2012, a total of 1,491,053 Common Shares remain available for issuance under the ESPP.

ACE generally issues Common Shares for the exercise of stock options, restricted stock, and purchases under the ESPP from un-issued reserved shares and Common Shares in treasury.

The following table presents pre-tax and after-tax share-based compensation expense:
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

Stock options and shares issued under ESPP:
 
 
 
 
 
Pre-tax
$
22

 
$
23

 
$
28

After-tax (1)
$
17

 
$
17

 
$
20

Restricted stock:
 
 
 
 
 
Pre-tax
$
109

 
$
108

 
$
111

After-tax
$
64

 
$
70

 
$
79

 
 
 
 
 
 

(1) Excludes windfall tax benefit (shortfall) for share-based compensation recognized as a direct adjustment to Additional paid-in capital of $18 million, $6 million and $(1) million for the years ended December 31, 2012, 2011 and 2010, respectively.

Unrecognized compensation expense related to the unvested portion of ACE's employee share-based awards was $119 million at December 31, 2012, and is expected to be recognized over a weighted-average period of approximately 1 year.

Stock options
ACE's 2004 LTIP provides for grants of both incentive and non-qualified stock options principally at an option price per share equal to the fair value of ACE's Common Shares on the date of grant. Stock options are generally granted with a 3-year vesting period and a 10-year term. The stock options vest in equal annual installments over the respective vesting period, which is also the requisite service period.

Included in ACE's share-based compensation expense in the year ended December 31, 2012, is a portion of the cost related to the 2009-2012 stock option grants. The fair value of the stock options was estimated on the date of grant using the Black-Scholes option-pricing model that uses the weighted-average assumptions noted below. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected life (estimated period of time from grant to exercise date) was estimated using the historical exercise behavior of employees. Expected volatility was calculated as a blend of (a) historical volatility based on daily closing prices over a period equal to the expected life assumption, (b) long-term historical volatility based on daily closing prices over the period from ACE's initial public trading date through the most recent quarter, and (c) implied volatility derived from ACE's publicly traded options.

The fair value of the options issued is estimated on the date of grant using the Black-Scholes option-pricing model. The following table presents the weighted-average model assumptions used for grants:
 
Years Ended December 31
 
 
2012

2011

2010

Dividend yield
2.7
%
2.2
%
2.5
%
Expected volatility
29.8
%
28.8
%
30.3
%
Risk-free interest rate
1.1
%
2.3
%
2.5
%
Forfeiture rate
6.5
%
6.5
%
7.5
%
Expected life
5.8 years

5.4 years

5.4 years



The following table presents a roll-forward of ACE's stock options:
(Intrinsic Value in millions of U.S. dollars)
Number of Options

 
Weighted-Average Exercise Price

 
Weighted-Average Fair Value

 
Total Intrinsic Value

Options outstanding, December 31, 2009
11,483,104

 
$
45.46

 
 
 
 
Granted
2,094,227

 
$
50.38

 
$
12.09

 
 
Exercised
(1,328,715
)
 
$
40.11

 
 
 
$
22

Forfeited
(305,723
)
 
$
49.77

 
 
 
 
Options outstanding, December 31, 2010
11,942,893

 
$
46.80

 
 
 
 
Granted
1,649,824

 
$
62.68

 
$
14.67

 
 
Exercised
(2,741,238
)
 
$
44.45

 
 
 
$
63

Forfeited
(271,972
)
 
$
51.33

 
 
 
 
Options outstanding, December 31, 2011
10,579,507

 
$
49.78

 
 
 
 
Granted
1,462,103

 
$
73.36

 
$
15.58

 
 
Exercised
(2,401,869
)
 
$
42.50

 
 
 
$
78

Forfeited
(190,082
)
 
$
61.87

 
 
 
 
Options outstanding, December 31, 2012
9,449,659

 
$
55.03

 
 
 
$
234

Options exercisable, December 31, 2012
6,446,407

 
$
50.26

 
 
 
$
190



The weighted-average remaining contractual term was 6.2 years for the stock options outstanding and 4.8 years for the stock options exercisable at December 31, 2012. The amount of cash received during the year ended December 31, 2012 from the exercise of stock options was $95 million.

Restricted stock and restricted stock units
ACE's 2004 LTIP provides for grants of restricted stock and restricted stock units with a 4-year vesting period, based on a graded vesting schedule. ACE also grants restricted stock awards to non-management directors which vest at the following year's annual general meeting. The restricted stock is granted at market close price on the date of grant. Each restricted stock unit represents our obligation to deliver to the holder one Common Share upon vesting. Included in our share-based compensation expense for the year ended December 31, 2012, is a portion of the cost related to the restricted stock granted in the years 2008 - 2012.

The following table presents a roll-forward of our restricted stock awards. Included in the roll-forward below are 25,669 restricted stock awards, 32,660 restricted stock awards, and 36,248 restricted stock awards that were granted to non-management directors during the years ended December 31, 2012, 2011, and 2010 respectively:
 
Number of Restricted Stock

 
Weighted-Average Grant-Date Fair Value

Unvested restricted stock, December 31, 2009
4,873,429

 
$
48.25

Granted
2,461,076

 
$
51.09

Vested
(1,771,423
)
 
$
50.79

Forfeited
(257,350
)
 
$
47.93

Unvested restricted stock, December 31, 2010
5,305,732

 
$
48.74

Granted
1,808,745

 
$
60.01

Vested
(1,929,189
)
 
$
50.82

Forfeited
(333,798
)
 
$
47.46

Unvested restricted stock, December 31, 2011
4,851,490

 
$
52.20

Granted
1,589,178

 
$
73.46

Vested
(1,923,385
)
 
$
52.71

Forfeited
(262,436
)
 
$
58.40

Unvested restricted stock, December 31, 2012
4,254,847

 
$
59.53



During the years ended December 31, 2012, 2011, and 2010, ACE awarded 262,549 restricted stock units, 261,214 restricted stock units, and 326,091 restricted stock units, respectively, to employees and officers of ACE and its subsidiaries each with a weighted-average grant date fair value per share of $73.41, $62.85, and $50.36, respectively. At December 31, 2012, there were 637,085 unvested restricted stock units.

Prior to 2009, ACE granted restricted stock units with a 1-year vesting period to non-management directors. Delivery of Common Shares on account of these restricted stock units to non-management directors is deferred until six months after the date of the non-management directors' termination from the Board. At December 31, 2012, there were 196,431 deferred restricted stock units.

ESPP
The ESPP gives participating employees the right to purchase Common Shares through payroll deductions during consecutive subscription periods at a purchase price of 85 percent of the fair value of a Common Share on the exercise date (Purchase Price). Annual purchases by participants are limited to the number of whole shares that can be purchased by an amount equal to ten percent of the participant's compensation or $25,000, whichever is less. The ESPP has two six-month subscription periods, the first of which runs between January 1 and June 30 and the second of which runs between July 1 and December 31 of each year. The amounts that have been collected from participants during a subscription period are used on the exercise date to purchase full shares of Common Shares. An exercise date is generally the last trading day of a subscription period. The number of shares purchased is equal to the total amount, at the exercise date, that has been collected from the participants through payroll deductions for that subscription period, divided by the Purchase Price, rounded down to the next full share. Participants may withdraw from an offering before the exercise date and obtain a refund of the amounts withheld through payroll deductions. Pursuant to the provisions of the ESPP, during the years ended December 31, 2012, 2011, and 2010, employees paid $13 million, $12 million, and $10 million to purchase 198,244 shares, 205,812 shares, and 240,979 shares, respectively.
Pension plans
Pension plans
Pension plans

ACE provides pension benefits to eligible employees and their dependents through various defined contribution plans and defined benefit plans sponsored by ACE. The defined contribution plans include a capital accumulation plan (401(k)) in the U.S. The defined benefit plans consist of various plans offered in certain jurisdictions outside of the U.S. and Bermuda.

Defined contribution plans (including 401(k))
Under these plans, employees' contributions may be supplemented by ACE matching contributions based on the level of employee contribution. These contributions are invested at the election of each employee in one or more of several investment portfolios offered by a third party investment advisor. Expenses for these plans totaled $99 million, $96 million, and $87 million for the years ended December 31, 2012, 2011, and 2010, respectively.

Defined benefit plans
We maintain non-contributory defined benefit plans that cover certain employees, principally located in Europe and Asia. We also provide a defined benefit plan to certain U.S.-based employees as a result of our acquisition of Penn Millers in November 2011. We account for pension benefits using the accrual method. Benefits under these plans are based on employees' years of service and compensation during final years of service. All underlying defined benefit plans are subject to periodic actuarial valuation by qualified local actuarial firms using actuarial models in calculating the pension expense and liability for each plan. We use December 31 as the measurement date for our defined benefit pension plans.

At December 31, 2012, the fair value of plan assets and the projected benefit obligation were $487 million and $531 million, respectively. The fair value of plan assets and the projected benefit obligation were $434 million and $508 million, respectively, at December 31, 2011. The accrued pension liability of $44 million and $74 million at December 31, 2012 and 2011, respectively is included in Accounts payable, accrued expenses, and other liabilities in the consolidated balance sheets.

The defined benefit pension plan contribution for 2013 is expected to be $18 million. The estimated net actuarial loss for the defined benefit pension plans that will be amortized from AOCI into net benefit costs over the next year is $3 million.

Benefit payments were $37 million and $21 million for the years ended December 31, 2012 and 2011, respectively. Benefit payments for the year ended December 31, 2012 included $12 million related to the full settlement of a defined benefit plan. Expected future payments are as follows:

For the year ending December 31
(in millions of U.S dollars)
2013
$
21

2014
21

2015
23

2016
24

2017
22

2018-2022
127

Other (income) expense
Other (income) expense
Other (income) expense

The following table presents the components of Other (income) expense as reflected in the consolidated statements of operations:
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

Equity in net (income) loss of partially-owned entities
$
(80
)
 
$
(32
)
 
$
(75
)
Amortization of intangible assets
51

 
29

 
9

(Gains) losses from fair value changes in separate account assets
(29
)
 
36

 
—

Federal excise and capital taxes
22

 
20

 
19

Acquisition-related costs
11

 
5

 
14

Other
19

 
23

 
23

Other (income) expense
$
(6
)
 
$
81

 
$
(10
)


Other (income) expense includes (Gains) losses from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP. The offsetting movement in the separate account liabilities is included in Policy benefits in the consolidated statements of operations. Refer to Note 1 i) for additional information. Equity in net (income) loss of partially-owned entities includes our share of net (income) loss related to investment funds, limited partnerships, partially-owned investment companies, and partially-owned insurance companies.  Certain federal excise and capital taxes incurred as a result of capital management initiatives are included in Other (income) expense in the consolidated statements of operations. As these are considered capital transactions, they are excluded from underwriting results.
Segment information
Segment information
Segment information

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

The Insurance – North American segment comprises our operations in the U.S., Canada, and Bermuda. This segment includes the operations of ACE USA (including ACE Canada), ACE Commercial Risk Services, ACE Private Risk Services, ACE Westchester, ACE Agriculture, ACE Bermuda, and various run-off operations, including Brandywine. ACE USA is the North American retail operating division which provides a broad array of traditional and specialty P&C, A&H, and risk management products and services to a diverse group of commercial and non-commercial enterprises and consumers. ACE Commercial Risk Services addresses the insurance needs of small and mid-sized businesses in North America by delivering an array of specialty product solutions for targeted industries that lend themselves to technology-assisted underwriting. ACE Private Risk Services provides personal lines coverages for high net worth individuals and families in North America. ACE Westchester focuses on the North American wholesale distribution of excess and surplus lines property, casualty, environmental, professional liability and inland marine products. ACE Agriculture provides comprehensive Multiple Peril Crop Insurance, crop-hail and farm P&C insurance protection to customers in the U.S. and Canada through Rain and Hail as well as specialty P&C insurance coverages to Agribusiness customers through Penn Millers. ACE Bermuda provides commercial insurance products on an excess basis mainly to a global client base targeting Fortune 1000 companies and covering exposures that are generally low in frequency and high in severity. The run-off operations do not actively sell insurance products but are responsible for the management of certain existing policies and settlement of related claims.

The Insurance – Overseas General segment comprises ACE International, our global retail insurance operations, the wholesale insurance business of ACE Global Markets (AGM), and the international A&H business of Combined Insurance. ACE International is our retail business serving territories outside the U.S., Bermuda, and Canada, and maintains a presence in every major insurance market in the world and is organized geographically along product lines that provide dedicated underwriting focus to customers. ACE International has four regions of operations: ACE Europe, ACE Asia Pacific, ACE Far East, and ACE Latin America. Companies within the Insurance – Overseas General segment write a variety of insurance products including P&C, professional lines (directors and officers and errors and omissions), marine, energy, aviation, political risk, specialty consumer-oriented products, and A&H (principally accident and supplemental health). AGM, our London-based international specialty and excess and surplus lines business, includes Syndicate 2488, a wholly-owned ACE syndicate. AGM offers products through its parallel distribution network via ACE European Group Limited (AEGL) and Syndicate 2488. ACE provides funds at Lloyd's to support underwriting by Syndicate 2488, which is managed by ACE Underwriting Agencies Limited. AGM uses Syndicate 2488 to underwrite P&C business on a global basis through Lloyd's worldwide licenses. AGM uses AEGL to underwrite similar classes of business through its network of U.K. and European licenses, and in the U.S. where it is eligible to write excess and surplus lines business. The reinsurance operation of AGM is included in the Global Reinsurance segment. Combined Insurance distributes a wide range of supplemental A&H products.

The Global Reinsurance segment represents ACE's reinsurance operations comprising ACE Tempest Re Bermuda, ACE Tempest Re USA, ACE Tempest Re International, and ACE Tempest Re Canada. The Global Reinsurance segment also includes AGM's reinsurance operations. These divisions provide a broad range of traditional and specialty reinsurance products including property catastrophe, casualty, and property reinsurance coverages to a diverse array of primary P&C insurers.

The Life segment includes ACE's international life operations (ACE Life), ACE Tempest Life Re (ACE Life Re), and the North American supplemental A&H and life business of Combined Insurance. ACE Life provides a broad portfolio of protection and savings products including whole life, endowment plans, individual term life, group term life, group medical, personal accident, credit life, universal life and unit linked contracts through multiple distribution channels primarily in emerging markets, including Egypt, Hong Kong, Indonesia, South Korea, Taiwan, Thailand and Vietnam; also throughout Latin America, selectively in Europe, and China through a non-consolidated joint venture insurance company. ACE Life Re helps clients (ceding companies) manage mortality, morbidity, and lapse risks embedded in their books of business. ACE Life Re's core business is a Bermuda-based operation which provides reinsurance to primary life insurers, focusing on guarantees included in certain fixed and variable annuity products and also on more traditional mortality reinsurance protection. ACE Life Re's U.S.-based traditional life reinsurance operation was discontinued for new business in January 2010. Since 2007, ACE Life Re has not quoted on new opportunities in the variable annuity reinsurance marketplace. Combined Insurance distributes specialty supplemental A&H and life insurance products targeted to middle income consumers, businesses, and students through educational institutions in the U.S. and Canada.

Corporate and Other (Corporate) includes ACE Limited, ACE Group Management and Holdings Ltd., ACE INA Holdings, Inc., and intercompany eliminations. Losses and loss expenses arise in connection with the commutation of ceded reinsurance contracts that result from a differential between the consideration received from reinsurers and the related reduction of reinsurance recoverable, principally related to the time value of money. Due to our initiatives to reduce reinsurance recoverable balances and thereby encourage such commutations, losses recognized in connection with the commutation of ceded reinsurance contracts are generally not considered when assessing segment performance and, accordingly, are directly allocated to Corporate. ACE also eliminates the impact of intersegment loss portfolio transfer transactions which are not reflected in the results within the statements of operations by segment.
For segment reporting purposes, certain items have been presented in a different manner than in the consolidated financial statements. Management uses underwriting income as the main measure of segment performance. ACE calculates underwriting income by subtracting Losses and loss expenses, Policy benefits, Policy acquisition costs, and Administrative expenses from Net premiums earned. For the Life business, management also includes Net investment income and (Gains) losses from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP as components of underwriting income. For example, for the year ended December 31, 2012, Life underwriting income of $402 million includes Net investment income of $251 million and gains from fair value changes in separate account assets of $29 million.
Effective January 1, 2012, we reclassified prior years segment operating results in order to conform to certain organizational realignments.  These realignments resulted in a transfer of operating revenue and underwriting results of our international direct-marketed and credit life businesses from the Insurance – Overseas General segment to the Life segment. These realignments have no impact on consolidated operating results; however, prior years segment operating results contained in this report have been adjusted to conform to the current year presentation.
The following tables present the operations by segment:
Statement of Operations by Segment
For the Year Ended December 31, 2012 (in millions of U.S. dollars)
Insurance –
North
American

 
Insurance –
Overseas
General

 
Global
Reinsurance

 
Life

 
Corporate
and Other

 
ACE
Consolidated

Net premiums written
$
7,208

 
$
5,863

 
$
1,025

 
$
1,979

 
$
—

 
$
16,075

Net premiums earned
7,019

 
5,740

 
1,002

 
1,916

 
—

 
15,677

Losses and loss expenses
5,626

 
2,862

 
553

 
611

 
1

 
9,653

Policy benefits
—

 
—

 
—

 
521

 
—

 
521

Policy acquisition costs
586

 
1,353

 
172

 
334

 
1

 
2,446

Administrative expenses
601

 
935

 
51

 
328

 
181

 
2,096

Underwriting income (loss)
206

 
590

 
226

 
122

 
(183
)
 
961

Net investment income
1,091

 
521

 
290

 
251

 
28

 
2,181

Net realized gains (losses) including OTTI
42

 
103

 
6

 
(72
)
 
(1
)
 
78

Interest expense
12

 
5

 
4

 
12

 
217

 
250

Other (income) expense:
 
 
 
 
 
 
 
 
 
 
 
(Gains) losses from fair value changes in separate account assets
—

 
—

 
—

 
(29
)
 
—

 
(29
)
Other
(9
)
 
3

 
(15
)
 
25

 
19

 
23

Income tax expense (benefit)
200

 
133

 
15

 
58

 
(136
)
 
270

Net income (loss)
$
1,136

 
$
1,073

 
$
518

 
$
235

 
$
(256
)
 
$
2,706



 
Statement of Operations by Segment
For the Year Ended December 31, 2011
(in millions of U.S. dollars)
Insurance –
North
American

 
Insurance –
Overseas
General

 
Global
Reinsurance

 
Life

 
Corporate
and Other

 
ACE
Consolidated

Net premiums written
$
6,851

 
$
5,629

 
$
979

 
$
1,913

 
$
—

 
$
15,372

Net premiums earned
6,911

 
5,614

 
1,003

 
1,859

 
—

 
15,387

Losses and loss expenses
5,276

 
3,029

 
621

 
593

 
1

 
9,520

Policy benefits
—

 
—

 
—

 
401

 
—

 
401

Policy acquisition costs
612

 
1,335

 
185

 
339

 
1

 
2,472

Administrative expenses
592

 
939

 
52

 
317

 
168

 
2,068

Underwriting income (loss)
431

 
311

 
145

 
209

 
(170
)
 
926

Net investment income
1,170

 
546

 
287

 
226

 
13

 
2,242

Net realized gains (losses) including OTTI
34

 
33

 
(50
)
 
(806
)
 
(6
)
 
(795
)
Interest expense
15

 
5

 
2

 
11

 
217

 
250

Other (income) expense
 
 
 
 
 
 
 
 
 
 
 
(Gains) losses from fair value changes in separate account assets
—

 
—

 
—

 
36

 
—

 
36

Other
5

 
—

 
(1
)
 
26

 
15

 
45

Income tax expense (benefit)
395

 
164

 
30

 
50

 
(137
)
 
502

Net income (loss)
$
1,220

 
$
721

 
$
351

 
$
(494
)
 
$
(258
)
 
$
1,540


Statement of Operations by Segment
For the Year Ended December 31, 2010
(in millions of U.S. dollars)
Insurance –
North
American

 
Insurance –
Overseas
General

 
Global
Reinsurance

 
Life

 
Corporate
and Other

 
ACE
Consolidated

Net premiums written
$
5,797

 
$
5,189

 
$
1,075

 
$
1,647

 
$
—

 
$
13,708

Net premiums earned
5,651

 
5,153

 
1,071

 
1,629

 
—

 
13,504

Losses and loss expenses
3,918

 
2,615

 
518

 
528

 
—

 
7,579

Policy benefits
—

 
—

 
—

 
357

 
—

 
357

Policy acquisition costs
626

 
1,209

 
204

 
306

 
—

 
2,345

Administrative expenses
561

 
837

 
55

 
246

 
174

 
1,873

Underwriting income (loss)
546

 
492

 
294

 
192

 
(174
)
 
1,350

Net investment income
1,138

 
473

 
288

 
174

 
(3
)
 
2,070

Net realized gains (losses) including OTTI
417

 
123

 
93

 
(192
)
 
(9
)
 
432

Interest expense
9

 
1

 
—

 
3

 
211

 
224

Other (income) expense
(22
)
 
(13
)
 
(23
)
 
26

 
22

 
(10
)
Income tax expense (benefit)
435

 
171

 
42

 
59

 
(154)

 
553

Net income (loss)
$
1,679

 
$
929

 
$
656

 
$
86

 
$
(265
)
 
$
3,085


Underwriting assets are reviewed in total by management for purposes of decision-making. Other than goodwill, ACE does not allocate assets to its segments.
The following table presents net premiums earned for each segment by product:
(in millions of U.S. dollars)
Property &
All Other

 
Casualty

 
Life,
Accident &
Health

 
ACE
Consolidated

For the Year Ended December 31, 2012
 
 
 
 
 
 
 
Insurance – North American
$
3,242

 
$
3,406

 
$
371

 
$
7,019

Insurance – Overseas General
2,236

 
1,379

 
2,125

 
5,740

Global Reinsurance
495

 
507

 
—

 
1,002

Life
—

 
—

 
1,916

 
1,916

 
$
5,973

 
$
5,292

 
$
4,412

 
$
15,677

For the Year Ended December 31, 2011
 
 
 
 
 
 
 
Insurance – North American
$
3,174

 
$
3,380

 
$
357

 
$
6,911

Insurance – Overseas General
2,080

 
1,415

 
2,119

 
5,614

Global Reinsurance
458

 
545

 
—

 
1,003

Life
—

 
—

 
1,859

 
1,859

 
$
5,712

 
$
5,340

 
$
4,335

 
$
15,387

For the Year Ended December 31, 2010
 
 
 
 
 
 
 
Insurance – North American
$
1,578

 
$
3,777

 
$
296

 
$
5,651

Insurance – Overseas General
1,800

 
1,424

 
1,929

 
5,153

Global Reinsurance
520

 
551

 
—

 
1,071

Life
—

 
—

 
1,629

 
1,629

 
$
3,898

 
$
5,752

 
$
3,854

 
$
13,504




The following table presents net premiums earned by geographic region. Allocations have been made on the basis of location of risk:
 
 
North America

 
 
 
Asia
 Pacific/Far East

 
Latin America

Years Ended
 
 
Europe

 
 
2012
 
60
%
 
17
%
 
16
%
 
7
%
2011
 
61
%
 
18
%
 
14
%
 
7
%
2010
 
61
%
 
20
%
 
13
%
 
6
%
Earnings per share
Earnings per share
Earnings per share
As discussed in Note 1, the following table presents the computation of basic and diluted earnings per share:
 
 
Years Ended December 31
 
 (in millions of U.S. dollars, except share and per share data)
2012

 
2011

 
2010

Numerator:
 
 
 
 
 
Net income
$
2,706

 
$
1,540

 
$
3,085

Denominator:
 
 
 
 
 
Denominator for basic earnings per share:
 
 
 
 
 
Weighted-average shares outstanding
339,843,438

 
338,159,409

 
339,685,143

Denominator for diluted earnings per share:
 
 
 
 
 
Share-based compensation plans
2,903,512

 
2,620,815

 
1,561,244

Adjusted weighted-average shares outstanding and assumed conversions
342,746,950

 
340,780,224

 
341,246,387

Basic earnings per share
$
7.96

 
$
4.55

 
$
9.08

Diluted earnings per share
$
7.89

 
$
4.52

 
$
9.04

Potential anti-dilutive share conversions
896,591

 
111,326

 
256,868



Excluded from adjusted weighted-average shares outstanding and assumed conversions is the impact of securities that would have been anti-dilutive during the respective years.
Related party transaction
Related party transactions
Related party transactions

The ACE Foundation – Bermuda is an unconsolidated not-for-profit organization whose primary purpose is to fund charitable causes in Bermuda. The Trustees are principally ACE management. ACE maintains a non-interest bearing demand note receivable from the ACE Foundation – Bermuda (Borrower), the balance of which was $27 million and $29 million, at December 31, 2012 and 2011, respectively. The receivable is included in Other assets in the consolidated balance sheets. The Borrower has used the related proceeds to finance investments in Bermuda real estate, some of which have been rented to ACE employees at rates established by independent, professional real estate appraisers. The Borrower uses income from the investments to both repay the note and to fund charitable activities. Accordingly, we report the demand note at the lower of its principal value or the fair value of assets held by the Borrower to repay the loan, including the real estate properties.
Statutory Financial Information
Statutory financial information
Statutory financial information

Our subsidiaries file financial statements prepared in accordance with statutory accounting practices prescribed or permitted by insurance regulators. Statutory accounting differs from GAAP in the reporting of certain reinsurance contracts, investments, subsidiaries, acquisition expenses, fixed assets, deferred income taxes, and certain other items. Our international subsidiaries prepare statutory financial statements based on local laws and regulations. Some jurisdictions impose complex regulatory requirements on insurance companies while other jurisdictions impose fewer requirements. In some countries, we must obtain licenses issued by governmental authorities to conduct local insurance business. These licenses may be subject to reserves and minimum capital and solvency tests. Jurisdictions may impose fines, censure, and/or criminal sanctions for violation of regulatory requirements.

ACE's insurance and reinsurance subsidiaries are subject to insurance laws and regulations in the jurisdictions in which they operate. These regulations include restrictions that limit the amount of dividends or other distributions, such as loans or cash advances, available to shareholders without prior approval of the insurance regulatory authorities. The amount of dividends available to be paid in 2013 without prior approval for our U.S. and International subsidiaries totals $762 million and $2.1 billion, respectively.

The statutory capital and surplus of our insurance subsidiaries met regulatory requirements for 2012, 2011, and 2010.

The following tables present the combined statutory capital and surplus and statutory net income of the U.S. and International subsidiaries:
 
 
 
 
 
December 31

(in millions of U.S. dollars)
 
 
2012

 
2011

Statutory capital and surplus
 
 
 
 
 
U.S. Subsidiaries
 
 
$
6,037

 
$
5,858

International Subsidiaries
 
 
$
18,317

 
$
15,565

 
 
 
 
 
 
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

Statutory net income
 
 
 
 
 
U.S. Subsidiaries
$
619

 
$
702

 
$
1,025

International Subsidiaries
$
2,118

 
$
1,214

 
$
2,592



Several insurance subsidiaries follow accounting practices prescribed or permitted by the jurisdiction of domicile that differ from the applicable NAIC or local statutory practice. The application of prescribed or permitted accounting practices does not have a material impact on ACE's statutory surplus and income. As prescribed by the Restructuring discussed previously in Note 7, certain of our U.S. subsidiaries discount certain A&E liabilities, which increased statutory capital and surplus by approximately $161 million and $192 million at December 31, 2012 and 2011, respectively.
Information provided in connection with outstanding debt of subsidiaries
Information provided in connection with outstanding debt of subsidiaries
Information provided in connection with outstanding debt of subsidiaries

The following tables present condensed consolidating financial information at December 31, 2012 and December 31, 2011, and for the years ended December 31, 2012, 2011, and 2010 for ACE Limited (the Parent Guarantor) and ACE INA Holdings, Inc. (the Subsidiary Issuer). The Subsidiary Issuer is an indirect 100 percent-owned subsidiary of the Parent Guarantor. Investments in subsidiaries are accounted for by the Parent Guarantor under the equity method for purposes of the supplemental consolidating presentation. Earnings of subsidiaries are reflected in the Parent Guarantor's investment accounts and earnings. The Parent Guarantor fully and unconditionally guarantees certain of the debt of the Subsidiary Issuer. Condensed consolidating financial information of the Subsidiary Issuer is presented on a consolidated basis and consists principally of the net assets, results of operations, and cash flows of operating insurance company subsidiaries.

Condensed Consolidating Balance Sheet at December 31, 2012

(in millions of U.S. dollars)
ACE Limited
(Parent
Guarantor)

 
ACE INA
Holdings Inc.
(Subsidiary
Issuer)

 
Other ACE
Limited
Subsidiaries and
Eliminations(1)

 
Consolidating
Adjustments(2)

 
ACE Limited
Consolidated

Assets
 
 
 
 
 
 
 
 
 
Investments
$
31

 
$
31,074

 
$
29,159

 
$
—

 
$
60,264

Cash(3)
103

 
515

 
(3
)
 
—

 
615

Insurance and reinsurance balances receivable
—

 
3,654

 
493

 
—

 
4,147

Reinsurance recoverable on losses and loss expenses
—

 
17,232

 
(5,154
)
 
—

 
12,078

Reinsurance recoverable on policy benefits
—

 
1,187

 
(946
)
 
—

 
241

Value of business acquired
—

 
610

 
4

 
—

 
614

Goodwill and other intangible assets
—

 
4,419

 
556

 
—

 
4,975

Investments in subsidiaries
27,251

 
—

 
—

 
(27,251
)
 
—

Due from subsidiaries and affiliates, net
204

 
—

 
—

 
(204
)
 
—

Other assets
13

 
7,563

 
2,035

 
—

 
9,611

Total assets
$
27,602

 
$
66,254

 
$
26,144

 
$
(27,455
)
 
$
92,545

Liabilities
 
 
 
 
 
 
 
 
 
Unpaid losses and loss expenses
$
—

 
$
31,356

 
$
6,590

 
$
—

 
$
37,946

Unearned premiums
—

 
5,872

 
992

 
—

 
6,864

Future policy benefits
—

 
3,876

 
594

 
—

 
4,470

Due to (from) subsidiaries and affiliates, net
—

 
384

 
(180
)
 
(204
)
 
—

Short-term debt
—

 
851

 
550

 
—

 
1,401

Long-term debt
—

 
3,360

 
—

 
—

 
3,360

Trust preferred securities
—

 
309

 
—

 
—

 
309

Other liabilities
71

 
8,272

 
2,321

 
—

 
10,664

Total liabilities
71

 
54,280

 
10,867

 
(204
)
 
65,014

Total shareholders’ equity
27,531

 
11,974

 
15,277

 
(27,251
)
 
27,531

Total liabilities and shareholders’ equity
$
27,602

 
$
66,254

 
$
26,144

 
$
(27,455
)
 
$
92,545

(1) 
Includes all other subsidiaries of ACE Limited and intercompany eliminations.
(2) 
Includes ACE Limited parent company eliminations.
(3) 
ACE maintains two notional multi-currency cash pools (Pools) with a third-party bank. Refer to Note 1f) for additional information. At December 31, 2012, the cash balance of one or more entities was negative; however, the overall Pool balances were positive.
Condensed Consolidating Balance Sheet at December 31, 2011

(in millions of U.S. dollars)
ACE Limited
(Parent
Guarantor)

 
ACE INA
Holdings Inc.
(Subsidiary
Issuer)

 
Other ACE
Limited
Subsidiaries and
Eliminations(1)

 
Consolidating
Adjustments(2)

 
ACE Limited
Consolidated

Assets
 
 
 
 
 
 
 
 
 
Investments
$
33

 
$
28,848

 
$
26,795

 
$
—

 
$
55,676

Cash
106

 
382

 
126

 
—

 
614

Insurance and reinsurance balances receivable
—

 
3,944

 
443

 
—

 
4,387

Reinsurance recoverable on losses and loss expenses
—

 
17,146

 
(4,757
)
 
—

 
12,389

Reinsurance recoverable on policy benefits
—

 
941

 
(692
)
 
—

 
249

Value of business acquired
—

 
676

 
—

 
—

 
676

Goodwill and other intangible assets
—

 
4,248

 
551

 
—

 
4,799

Investments in subsidiaries
23,871

 
—

 
—

 
(23,871
)
 
—

Due from subsidiaries and affiliates, net
498

 
—

 
—

 
(498
)
 
—

Other assets
8

 
7,018

 
1,505

 
—

 
8,531

Total assets
$
24,516

 
$
63,203

 
$
23,971

 
$
(24,369
)
 
$
87,321

Liabilities
 
 
 
 
 
 
 
 
 
Unpaid losses and loss expenses
$
—

 
$
30,837

 
$
6,640

 
$
—

 
$
37,477

Unearned premiums
—

 
5,416

 
918

 
—

 
6,334

Future policy benefits
—

 
3,673

 
601

 
—

 
4,274

Due to subsidiaries and affiliates, net
—

 
316

 
182

 
(498
)
 
—

Short-term debt
—

 
850

 
401

 
—

 
1,251

Long-term debt
—

 
3,360

 
—

 
—

 
3,360

Trust preferred securities
—

 
309

 
—

 
—

 
309

Other liabilities
184

 
7,769

 
2,031

 
—

 
9,984

Total liabilities
184

 
52,530

 
10,773

 
(498
)
 
62,989

Total shareholders’ equity
24,332

 
10,673

 
13,198

 
(23,871
)
 
24,332

Total liabilities and shareholders’ equity
$
24,516

 
$
63,203

 
$
23,971

 
$
(24,369
)
 
$
87,321

(1) 
Includes all other subsidiaries of ACE Limited and intercompany eliminations.
(2) 
Includes ACE Limited parent company eliminations.
Condensed Consolidating Statements of Operations and Comprehensive Income

For the Year Ended December 31, 2012
ACE Limited
(Parent
Guarantor)

 
ACE INA
Holdings Inc.
(Subsidiary
Issuer)

 
Other ACE
Limited
Subsidiaries and
Eliminations(1)

 
Consolidating
Adjustments (2)

 
ACE Limited
Consolidated

(in millions of U.S. dollars)
 
 
 
 
Net premiums written
$
—

 
$
9,466

 
$
6,609

 
$
—

 
$
16,075

Net premiums earned
—

 
9,194

 
6,483

 
—

 
15,677

Net investment income
1

 
1,048

 
1,132

 
—

 
2,181

Equity in earnings of subsidiaries
2,590

 
—

 
—

 
(2,590
)
 
—

Net realized gains (losses) including OTTI
17

 
121

 
(60
)
 
—

 
78

Losses and loss expenses
—

 
6,211

 
3,442

 
—

 
9,653

Policy benefits
—

 
309

 
212

 
—

 
521

Policy acquisition costs and administrative expenses
62

 
2,564

 
1,916

 
—

 
4,542

Interest (income) expense
(33
)
 
257

 
26

 
—

 
250

Other (income) expense
(137
)
 
77

 
54

 
—

 
(6
)
Income tax expense
10

 
193

 
67

 
—

 
270

Net income
$
2,706

 
$
752

 
$
1,838

 
$
(2,590
)
 
$
2,706

Comprehensive income
$
3,682

 
$
1,209

 
$
1,381

 
$
(2,590
)
 
$
3,682



Condensed Consolidating Statements of Operations and Comprehensive Income

For the Year Ended December 31, 2011
ACE Limited
(Parent
Guarantor)

 
ACE INA
Holdings Inc.
(Subsidiary
Issuer)

 
Other ACE
Limited
Subsidiaries and
Eliminations(1)

 
Consolidating
Adjustments (2)

 
ACE Limited
Consolidated

(in millions of U.S. dollars)
 
 
 
 
Net premiums written
$
—

 
$
9,081

 
$
6,291

 
$
—

 
$
15,372

Net premiums earned
—

 
9,082

 
6,305

 
—

 
15,387

Net investment income
2

 
1,096

 
1,144

 
—

 
2,242

Equity in earnings of subsidiaries
1,459

 
—

 
—

 
(1,459
)
 
—

Net realized gains (losses) including OTTI
(4
)
 
62

 
(853
)
 
—

 
(795
)
Losses and loss expenses
—

 
5,889

 
3,631

 
—

 
9,520

Policy benefits
—

 
192

 
209

 
—

 
401

Policy acquisition costs and administrative expenses
69

 
2,561

 
1,910

 
—

 
4,540

Interest (income) expense
(37
)
 
267

 
20

 
—

 
250

Other (income) expense
(125
)
 
143

 
63

 
—

 
81

Income tax expense
10

 
418

 
74

 
—

 
502

Net income
$
1,540

 
$
770

 
$
689

 
$
(1,459
)
 
$
1,540

Comprehensive income
$
1,857

 
$
1,077

 
$
382

 
$
(1,459
)
 
$
1,857

(1) 
Includes all other subsidiaries of ACE Limited and intercompany eliminations.
(2) 
Includes ACE Limited parent company eliminations.

Condensed Consolidating Statements of Operations and Comprehensive Income

For the Year Ended December 31, 2010
ACE Limited
(Parent
Guarantor)

 
ACE INA
Holdings Inc.
(Subsidiary
Issuer)

 
Other ACE
Limited
Subsidiaries and
Eliminations(1)

 
Consolidating
Adjustments (2)

 
ACE Limited
Consolidated

(in millions of U.S. dollars)
 
 
 
 
Net premiums written
$
—

 
$
8,195

 
$
5,513

 
$
—

 
$
13,708

Net premiums earned
—

 
7,940

 
5,564

 
—

 
13,504

Net investment income
1

 
1,011

 
1,058

 
—

 
2,070

Equity in earnings of subsidiaries
3,043

 
—

 
—

 
(3,043
)
 
—

Net realized gains (losses) including OTTI
(42
)
 
303

 
171

 
—

 
432

Losses and loss expenses
—

 
4,910

 
2,669

 
—

 
7,579

Policy benefits
—

 
148

 
209

 
—

 
357

Policy acquisition costs and administrative expenses
70

 
2,395

 
1,753

 
—

 
4,218

Interest (income) expense
(37
)
 
251

 
10

 
—

 
224

Other (income) expense
(123
)
 
101

 
12

 
—

 
(10
)
Income tax expense
7

 
441

 
105

 
—

 
553

Net income
$
3,085

 
$
1,008

 
$
2,035

 
$
(3,043
)
 
$
3,085

Comprehensive income
$
3,856

 
$
1,271

 
$
1,772

 
$
(3,043
)
 
$
3,856

(1) 
Includes all other subsidiaries of ACE Limited and intercompany eliminations.
(2) 
Includes ACE Limited parent company eliminations.
Condensed Consolidating Statement of Cash Flows 

For the Year Ended December 31, 2012
ACE Limited
(Parent
Guarantor)

 
ACE INA
Holdings Inc.
(Subsidiary
Issuer)

 
Other ACE
Limited
Subsidiaries and
Eliminations(1)

 
Consolidating
Adjustments (2)

 
ACE Limited
Consolidated

(in millions of U.S. dollars)
 
 
 
 
Net cash flows from operating activities
$
781

 
$
1,744

 
$
1,920

 
$
(450
)
 
$
3,995

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
Purchases of fixed maturities available for sale
—

 
(11,843
)
 
(12,001
)
 
—

 
(23,844
)
Purchases of fixed maturities held to maturity
—

 
(384
)
 
(4
)
 
—

 
(388
)
Purchases of equity securities
—

 
(70
)
 
(65
)
 
—

 
(135
)
Sales of fixed maturities available for sale
—

 
7,347

 
7,422

 
—

 
14,769

Sales of equity securities
—

 
59

 
60

 
—

 
119

Maturities and redemptions of fixed maturities available for sale
—

 
2,759

 
2,764

 
—

 
5,523

Maturities and redemptions of fixed maturities held to maturity
—

 
1,045

 
406

 
—

 
1,451

Net derivative instruments settlements
(1
)
 
(6
)
 
(274
)
 
—

 
(281
)
Capital contribution
—

 
—

 
(90
)
 
90

 
—

Advances from (to) affiliates
(2
)
 
—

 
—

 
2

 
—

Acquisition of subsidiaries (net of cash acquired of $8)
—

 
(111
)
 
13

 
—

 
(98
)
Other
—

 
(395
)
 
(160
)
 
—

 
(555
)
Net cash flows used for investing activities
(3
)
 
(1,599
)
 
(1,929
)
 
92

 
(3,439
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
Dividends paid on Common Shares
(815
)
 
—

 
—

 
—

 
(815
)
Common Shares repurchased
—

 
—

 
(11
)
 
—

 
(11
)
Net proceeds from issuance of short-term debt
—

 
1

 
149

 
—

 
150

Proceeds from share-based compensation plans, including windfall tax benefits
34

 
13

 
79

 
—

 
126

Advances (to) from affiliates
—

 
(105
)
 
107

 
(2
)
 
—

Dividends to parent company
—

 
—

 
(450
)
 
450

 
—

Capital contribution
—

 
90

 
—

 
(90
)
 
—

Net cash flows used for financing activities
(781
)
 
(1
)
 
(126
)
 
358

 
(550
)
Effect of foreign currency rate changes on cash and cash equivalents
—

 
(11
)
 
6

 
—

 
(5
)
Net increase (decrease) in cash
(3
)
 
133

 
(129
)
 
—

 
1

Cash – beginning of period
106

 
382

 
126

 
—

 
614

Cash – end of period(3)
$
103

 
$
515

 
$
(3
)
 
$
—

 
$
615

(1)
Includes all other subsidiaries of ACE Limited and intercompany eliminations.
(2)
Includes ACE Limited parent company eliminations and certain consolidating adjustments.
(3)
ACE maintains two notional multi-currency cash pools (Pools) with a third-party bank. Refer to Note 1 f) for additional information. At December 31, 2012, the cash balance of one or more entities was negative; however, the overall Pool balances were positive.
Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2011
ACE Limited
(Parent
Guarantor)

 
ACE INA
Holdings Inc.
(Subsidiary
Issuer)

 
Other ACE
Limited
Subsidiaries and
Eliminations(1)

 
Consolidating
Adjustments (2)

 
ACE Limited
Consolidated

(in millions of U.S. dollars)
 
 
 
 
Net cash flows from operating activities
$
762

 
$
1,053

 
$
2,395

 
$
(740
)
 
$
3,470

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
Purchases of fixed maturities available for sale
—

 
(12,203
)
 
(12,375
)
 
—

 
(24,578
)
Purchases of fixed maturities held to maturity
—

 
(338
)
 
(2
)
 
—

 
(340
)
Purchases of equity securities
—

 
(157
)
 
(152
)
 
—

 
(309
)
Sales of fixed maturities available for sale
9

 
9,718

 
8,244

 
—

 
17,971

Sales of equity securities
—

 
354

 
22

 
—

 
376

Maturities and redemptions of fixed maturities available for sale
—

 
1,784

 
1,936

 
—

 
3,720

Maturities and redemptions of fixed maturities held to maturity
—

 
933

 
346

 
—

 
1,279

Net derivative instruments settlements
(3
)
 
(24
)
 
(40
)
 
—

 
(67
)
Capital contribution
(385
)
 
—

 
—

 
385

 
—

Advances from (to) affiliates
41

 
—

 
—

 
(41
)
 
—

Acquisition of subsidiaries (net of cash acquired of $91)
—

 
(569
)
 
(37
)
 
—

 
(606
)
Other
—

 
(420
)
 
(62
)
 
—

 
(482
)
Net cash flows used for investing activities
(338
)
 
(922
)
 
(2,120
)
 
344

 
(3,036
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
Dividends paid on Common Shares
(459
)
 
—

 
—

 
—

 
(459
)
Common Shares repurchased
—

 
—

 
(195
)
 
—

 
(195
)
Net proceeds from (repayments) issuance of short-term debt
(300
)
 
(150
)
 
400

 
—

 
(50
)
Proceeds from share-based compensation plans, including windfall tax benefits
133

 
3

 
3

 
—

 
139

Advances from (to) affiliates
—

 
(149
)
 
108

 
41

 
—

Dividends to parent company
—

 
—

 
(740
)
 
740

 
—

Capital contribution
—

 
—

 
385

 
(385
)
 
—

Net cash flows used for financing activities
(626
)
 
(296
)
 
(39
)
 
396

 
(565
)
Effect of foreign currency rate changes on cash and cash equivalents
—

 
(26
)
 
(1
)
 
—

 
(27
)
Net increase (decrease) in cash
(202
)
 
(191
)
 
235

 
—

 
(158
)
Cash – beginning of period(3)
308

 
573

 
(109
)
 
—

 
772

Cash – end of period
$
106

 
$
382

 
$
126

 
$
—

 
$
614

(1) 
Includes all other subsidiaries of ACE Limited and intercompany eliminations.
(2) 
Includes ACE Limited parent company eliminations and certain consolidating adjustments.
(3) 
ACE maintains two notional multi-currency cash pools (Pools) with a third-party bank. Refer to Note 1 f) for additional information. At December 31, 2010, the cash balance of one or more entities was negative; however, the overall Pool balances were positive.
Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2010
ACE Limited
(Parent
Guarantor)

 
ACE INA
Holdings Inc.
(Subsidiary
Issuer)

 
Other ACE
Limited
Subsidiaries and
Eliminations(1)

 
Consolidating
Adjustments (2)

 
ACE Limited
Consolidated

(in millions of U.S. dollars)
 
 
 
 
Net cash flows from operating activities
$
(176
)
 
$
1,798

 
$
2,124

 
$
(200
)
 
$
3,546

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
Purchases of fixed maturities available for sale
(1
)
 
(13,785
)
 
(17,470
)
 
—

 
(31,256
)
Purchases of fixed maturities held to maturity
—

 
(615
)
 
(1
)
 
—

 
(616
)
Purchases of equity securities
—

 
(107
)
 
(687
)
 
—

 
(794
)
Sales of fixed maturities available for sale
—

 
10,225

 
14,054

 
—

 
24,279

Sales of equity securities
—

 
17

 
757

 
—

 
774

Maturities and redemptions of fixed maturities available for sale
—

 
1,845

 
1,815

 
—

 
3,660

Maturities and redemptions of fixed maturities held to maturity
—

 
1,142

 
211

 
—

 
1,353

Net derivative instruments settlements
(3
)
 
(10
)
 
(96
)
 
—

 
(109
)
Capital contribution
(290
)
 
—

 
—

 
290

 
—

Advances from (to) affiliates
851

 
—

 
—

 
(851
)
 
—

Acquisition of subsidiaries (net of cash acquired of $80)
—

 
(1,139
)
 
—

 
—

 
(1,139
)
Other
—

 
(253
)
 
(80
)
 
—

 
(333
)
Net cash flows from (used for) investing activities
557

 
(2,680
)
 
(1,497
)
 
(561
)
 
(4,181
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
Dividends paid on Common Shares
(435
)
 
—

 
—

 
—

 
(435
)
Common Shares repurchased
—

 
—

 
(235
)
 
—

 
(235
)
Net proceeds from issuance of short-term debt
300

 
841

 
—

 
—

 
1,141

Net proceeds from issuance of long-term debt
—

 
199

 
—

 
—

 
199

Proceeds from share-based compensation plans, including windfall tax benefits
63

 
—

 
(1
)
 
—

 
62

Advances from (to) affiliates
—

 
3

 
(854
)
 
851

 
—

Dividends to parent company
—

 
—

 
(200
)
 
200

 
—

Capital contribution
—

 
—

 
290

 
(290
)
 
—

Net cash flows from (used for) financing activities
(72
)
 
1,043

 
(1,000
)
 
761

 
732

Effect of foreign currency rate changes on cash and cash equivalents
—

 
12

 
(6
)
 
—

 
6

Net increase (decrease) in cash
309

 
173

 
(379
)
 
—

 
103

Cash – beginning of period(3)
(1
)
 
400

 
270

 
—

 
669

Cash – end of period(3)
$
308

 
$
573

 
$
(109
)
 
$
—

 
$
772

(1) 
Includes all other subsidiaries of ACE Limited and intercompany eliminations.
(2) 
Includes ACE Limited parent company eliminations and certain consolidating adjustments.
(3) 
ACE maintains two notional multi-currency cash pools (Pools) with a third-party bank. Refer to Note 1 f) for additional information. At December 31, 2010 and 2009, the cash balance of one or more entities was negative; however, the overall Pool balances were positive.
Condensed Unaudited Quarterly Financial Data
Condensed unaudited quarterly financial data
Condensed unaudited quarterly financial data
 
Three Months Ended
 
 
March 31

 
June 30

 
September 30

 
December 31

(in millions of U.S. dollars, except per share data)
2012

 
2012

 
2012

 
2012

Net premiums earned
$
3,381

 
$
3,783

 
$
4,665

 
$
3,848

Net investment income
544

 
537

 
533

 
567

Net realized gains (losses) including OTTI
260

 
(394
)
 
(60
)
 
272

Total revenues
$
4,185

 
$
3,926

 
$
5,138

 
$
4,687

Losses and loss expenses
$
1,804

 
$
2,119

 
$
3,047

 
$
2,683

Policy benefits
$
147

 
$
102

 
$
130

 
$
142

Net income
$
973

 
$
328

 
$
640

 
$
765

Basic earnings per share
$
2.87

 
$
0.96

 
$
1.88

 
$
2.24

Diluted earnings per share
$
2.84

 
$
0.96

 
$
1.86

 
$
2.22

 
Three Months Ended
 
 
March 31

 
June 30

 
September 30

 
December 31

(in millions of U.S. dollars, except per share data)
2011

 
2011

 
2011

 
2011

Net premiums earned
$
3,309

 
$
3,757

 
$
4,490

 
$
3,831

Net investment income
544

 
569

 
564

 
565

Net realized gains (losses) including OTTI
(45
)
 
(73
)
 
(760
)
 
83

Total revenues
$
3,808

 
$
4,253

 
$
4,294

 
$
4,479

Losses and loss expenses
$
2,263

 
$
2,226

 
$
2,745

 
$
2,286

Policy benefits
$
91

 
$
108

 
$
83

 
$
119

Net income (loss)
$
250

 
$
594

 
$
(39
)
 
$
735

Basic earnings per share
$
0.74

 
$
1.75

 
$
(0.11
)
 
$
2.17

Diluted earnings per share
$
0.73

 
$
1.74

 
$
(0.11
)
 
$
2.15

Schedule I
Schedule I: SUMMARY OF INVESTEMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES
SUMMARY OF INVESTMENTS – OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 2012
(in millions of U.S. dollars)
Cost or Amortized Cost

 
Fair Value

 
Amount at Which Shown in the Balance Sheet

Fixed maturities available for sale
 
 
 
 
 
U.S. Treasury and agency
$
3,553

 
$
3,735

 
$
3,735

Foreign
13,016

 
13,713

 
13,713

Corporate securities
15,529

 
16,708

 
16,708

Mortgage-backed securities
10,051

 
10,473

 
10,473

States, municipalities, and political subdivisions
2,517

 
2,677

 
2,677

Total fixed maturities available for sale
44,666

 
47,306

 
47,306

Fixed maturities held to maturity
 
 
 
 
 
U.S. Treasury and agency
1,044

 
1,083

 
1,044

Foreign
910

 
964

 
910

Corporate securities
2,133

 
2,275

 
2,133

Mortgage-backed securities
2,028

 
2,116

 
2,028

States, municipalities, and political subdivisions
1,155

 
1,195

 
1,155

Total fixed maturities held to maturity
7,270

 
7,633

 
7,270

Equity securities
 
 
 
 
 
Industrial, miscellaneous, and all other
707

 
744

 
744

Short-term investments
2,228

 
2,228

 
2,228

Other investments
2,465

 
2,716

 
2,716

 
4,693

 
4,944

 
4,944

Total investments - other than investments in related parties
$
57,336

 
$
60,627

 
$
60,264

Schedule II
Schedule II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED FINANCIAL INFORMATION OF REGISTRANT

BALANCE SHEETS (Parent Company Only)
 
 
 
December 31

December 31

(in millions of U.S. dollars)
2012

2011

Assets
 
 
Investments in subsidiaries and affiliates on equity basis
$
27,251

$
23,871

Short-term investments
1

1

Other investments, at cost
30

32

Total investments
27,282

23,904

Cash
103

106

Due from subsidiaries and affiliates, net
204

498

Other assets
13

8

Total assets
$
27,602

$
24,516

Liabilities
 
 
Accounts payable, accrued expenses, and other liabilities
$
71

$
65

Dividends payable
—

119

Total liabilities
71

184

Shareholders' equity
 
 
Common Shares
9,591

10,095

Common Shares in treasury
(159
)
(327
)
Additional paid-in capital
5,179

5,326

Retained earnings
10,033

7,327

Accumulated other comprehensive income
2,887

1,911

Total shareholders' equity
27,531

24,332

Total liabilities and shareholders' equity
$
27,602

$
24,516

 
 
 
 
 
The condensed financial information should be read in conjunction with the consolidated financial statements and notes thereto.
 
 
 

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

STATEMENTS OF OPERATIONS (Parent Company Only)


 
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

2011

2010

Revenues
 
 
 
Investment income, including intercompany interest income
$
34

$
39

$
38

Equity in net income of subsidiaries and affiliates
2,590

1,459

3,043

Net realized gains (losses)
17

(4
)
(42
)
 
 
2,641

1,494

3,039

Expenses
 
 
 
Administrative and other (income) expense
(75
)
(56
)
(53
)
Income tax expense
10

10

7

 
 
(65
)
(46
)
(46
)
Net income
$
2,706

$
1,540

$
3,085

Comprehensive income
 
$
3,682

$
1,857

$
3,856

 
 
 
 
 
The condensed financial information should be read in conjunction with the consolidated financial statements and notes thereto.
 
 

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

STATEMENTS OF CASH FLOWS (Parent Company Only)

 
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012
 
 
2011
 
 
2010
 
Net cash flows from (used for) operating activities
 
$
781

 
 
$
762

 
 
$
(176
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
Purchases of fixed maturities available for sale
 
—

 
 
—

 
 
(1)

Sales of fixed maturities available for sale
 
—

 
 
9

 
 
—

Net derivative instruments settlements
 
(1
)
 
 
(3
)
 
 
(3)

Capital contribution to subsidiary
 
—

 
 
(385
)
 
 
(290
)
Advances (to) from affiliates
 
(2
)
 
 
41

 
 
851

Net cash flows from (used for) investing activities
 
(3
)
 
 
(338
)
 
 
557

Cash flows from financing activities
 
 
 
 
 
 
 
 
Dividends paid on Common Shares
 
(815
)
 
 
(459
)
 
 
(435
)
Net proceeds from issuance (repayment) of short-term debt
 
—

 
 
(300
)
 
 
300

Proceeds from share-based compensation plans
 
34

 
 
133

 
 
63

Net cash flows used for financing activities
 
(781
)
 
 
(626
)
 
 
(72
)
Net increase (decrease) in cash
 
(3
)
 
 
(202
)
 
 
309

Cash - beginning of year
 
106

 
 
308

 
 
(1
)
Cash - end of year
 
$
103

 
 
$
106

 
 
$
308

 
 
 
 
 
 
 
 
 
 
The condensed financial information should be read in conjunction with the consolidated financial statements and notes thereto.
Schedule IV
SUPPLEMENTAL INFORMATION CONCERNING REINSURANCE
SUPPLEMENTAL INFORMATION CONCERNING REINSURANCE

Premiums Earned
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the years ended December 31, 2012, 2011, and 2010 (in millions of U.S. dollars, except for percentages)
 
Direct Amount

 
Ceded To Other Companies

 
Assumed From Other Companies

 
Net Amount

 
Percentage of Amount Assumed to Net

2012
 
$
17,802

 
$
5,427

 
$
3,302

 
$
15,677

 
21
%
2011
 
$
17,534

 
$
5,496

 
$
3,349

 
$
15,387

 
22
%
2010
 
$
15,780

 
$
5,792

 
$
3,516

 
$
13,504

 
26
%
Schedule VI
SUPPLEMENTARY INFORMATION CONCERNING PROPERTY AND CASUALTY OPERATIONS
SUPPLEMENTARY INFORMATION CONCERNING PROPERTY AND CASUALTY OPERATIONS

As of and for the years ended December 31, 2012, 2011, and 2010 (in millions of U.S. dollars)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Losses and Loss Expenses Incurred Related to
 
 
 
 
 
 
 
 
 
Deferred Policy Acquisition Costs
 
 
Net Reserves for Unpaid Losses and Loss Expenses

 
Unearned Premiums

 
Net Premiums Earned

 
Net Investment Income

 
Current Year

 
Prior Year

 
Amortization of Deferred Policy Acquisition Costs

 
Net Paid Losses and Loss Expenses

 
Net Premiums Written

2012
 
$
1,757
 
 
$
26,547

 
$
6,864

 
$
14,764

 
$
2,018

 
$
10,132

 
$
(479
)
 
$
2,254

 
$
9,219

 
$
15,107

2011
 
$
1,512
 
 
$
25,875

 
$
6,334

 
$
14,523

 
$
2,107

 
$
10,076

 
$
(556
)
 
$
2,291

 
$
8,866

 
$
14,455

2010
 
$
1,435
 
 
$
25,242

 
$
6,330

 
$
12,893

 
$
1,994

 
$
8,082

 
$
(503
)
 
$
2,216

 
$
7,413

 
$
13,075

Summary of significant accounting policies (Policies)
Basis of presentation 
Basis of presentation
ACE Limited is a holding company incorporated in Zurich, Switzerland. ACE Limited, through its various subsidiaries, provides a broad range of insurance and reinsurance products to insureds worldwide. ACE operates through the following business segments: Insurance – North American, Insurance – Overseas General, Global Reinsurance, and Life. Refer to Note 15 for additional information.

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

Effective January 1, 2012, we retrospectively adopted new accounting guidance for costs associated with acquiring or renewing insurance contracts. Prior year amounts contained in this report have been adjusted to reflect this adoption. Refer to Note 1 s) below for additional information.
  
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Amounts included in the consolidated financial statements reflect our best estimates and assumptions; actual amounts could differ materially from these estimates. ACE's principal estimates include:
•
unpaid loss and loss expense reserves, including long-tail asbestos and environmental (A&E) reserves;
•
future policy benefits reserves;
•
the valuation of value of business acquired (VOBA) and amortization of deferred policy acquisition costs and VOBA;
•
reinsurance recoverable, including a provision for uncollectible reinsurance;
•
the assessment of risk transfer for certain structured insurance and reinsurance contracts;
•
the valuation of the investment portfolio and assessment of OTTI;
•
the valuation of deferred tax assets;
•
the valuation of derivative instruments related to guaranteed living benefits (GLB); and
•
the valuation of goodwill.
Premiums 
Premiums
Premiums are generally recognized as written upon inception of the policy. For multi-year policies for which premiums written are payable in annual installments, only the current annual premium is included as written at policy inception due to the ability of the insured/reinsured to commute or cancel coverage within the term of the policy. The remaining annual premiums are included as written at each successive anniversary date within the multi-year term.

For property and casualty (P&C) insurance and reinsurance products, premiums written are primarily earned on a pro-rata basis over the terms of the policies to which they relate. Unearned premiums represent the portion of premiums written applicable to the unexpired portion of the policies in force. For retrospectively-rated policies, written premiums are adjusted to reflect expected ultimate premiums consistent with changes to reported losses, or other measures of exposure as stated in the policy, and earned over the coverage period of the policy. For retrospectively-rated multi-year policies, the amount of premiums recognized in the current period is computed, using a with-and-without method, as the difference between the ceding enterprise's total contract costs before and after the experience under the contract at the reporting date. Accordingly, for retrospectively-rated multi-year policies, additional premiums are generally written and earned when losses are incurred.

Mandatory reinstatement premiums assessed on reinsurance policies are earned in the period of the loss event that gave rise to the reinstatement premiums.  All remaining unearned premiums are recognized over the remaining coverage period. 

Premiums from long duration contracts such as certain traditional term life, whole life, endowment, and long duration personal accident and health (A&H) policies are generally recognized as revenue when due from policyholders. Traditional life policies include those contracts with fixed and guaranteed premiums and benefits. Benefits and expenses are matched with such income to result in the recognition of profit over the life of the contracts.

Retroactive loss portfolio transfer (LPT) contracts in which the insured loss events occurred prior to the inception of the contract are evaluated to determine whether they meet the established criteria for reinsurance accounting. If reinsurance accounting is appropriate, written premiums are fully earned and corresponding losses and loss expenses recognized at the inception of the contract. The contracts can cause significant variances in gross premiums written, net premiums written, net premiums earned, and net incurred losses in the years in which they are written. Reinsurance contracts sold not meeting the established criteria for reinsurance accounting are recorded using the deposit method as described below in Note 1 k).

Reinsurance premiums assumed are based on information provided by ceding companies supplemented by our own estimates of premium when we have not received ceding company reports. The information used in establishing these estimates is reviewed and adjustments are recorded in the period in which they are determined. These premiums are earned over the coverage terms of the related reinsurance contracts and range from one to three years.
Deferred policy acquisition costs and value of business acquired 
Deferred policy acquisition costs and value of business acquired
Policy acquisition costs consist of commissions, premium taxes, and certain underwriting costs related directly to the successful acquisition of new or renewal insurance contracts. A VOBA intangible asset is established upon the acquisition of blocks of long duration contracts and represents the present value of estimated net cash flows for the contracts in force at the time of the acquisition. Acquisition costs and VOBA, collectively policy acquisition costs, are deferred and amortized. This amortization is recorded in Policy acquisition costs in the consolidated statements of operations. Policy acquisition costs on P&C contracts are generally amortized ratably over the period in which premiums are earned. Policy acquisition costs on traditional long-duration contracts are amortized over the estimated life of the contracts, generally in proportion to premium revenue recognized. For non-traditional long- duration contracts, we amortize policy acquisition costs over the expected life of the contracts in proportion to estimates of expected gross profits.  The effect of changes in estimates of expected gross profits is reflected in the period that the estimates are revised. Policy acquisition costs are reviewed to determine if they are recoverable from future income, including investment income. Unrecoverable costs are expensed in the period identified.

Advertising costs are expensed as incurred except for direct-response campaigns that qualify for cost deferral, principally related to A&H business produced by the Insurance – Overseas General segment, which are deferred and recognized as a component of policy acquisition costs. For individual direct-response marketing campaigns that we can demonstrate have specifically resulted in incremental sales to customers and such sales have probable future economic benefits, incremental costs directly related to the marketing campaigns are capitalized. Deferred marketing costs are reviewed regularly for recoverability from future income, including investment income, and amortized in proportion to premium revenue recognized, primarily over a ten-year period, the expected economic future benefit period. The expected future benefit period is evaluated periodically based on historical results and adjusted prospectively. The amount of deferred marketing costs reported in Deferred policy acquisition costs in the consolidated balance sheets was $274 million and $236 million at December 31, 2012 and 2011, respectively. The amortization expense for deferred marketing costs was $156 million, $128 million, and $115 million for the years ended December 31, 2012, 2011, and 2010, respectively.
Reinsurance 
Reinsurance
ACE assumes and cedes reinsurance with other insurance companies to provide greater diversification of business and minimize the net loss potential arising from large risks. Ceded reinsurance contracts do not relieve ACE of its primary obligation to its policyholders.

For both ceded and assumed reinsurance, risk transfer requirements must be met in order to account for a contract as reinsurance, principally resulting in the recognition of cash flows under the contract as premiums and losses. To meet risk transfer requirements, a reinsurance contract must include insurance risk, consisting of both underwriting and timing risk, and a reasonable possibility of a significant loss for the assuming entity. To assess risk transfer for certain contracts, ACE generally develops expected discounted cash flow analyses at contract inception. Deposit accounting is used for contracts that do not meet risk transfer requirements. Deposit accounting requires that consideration received or paid be recorded in the balance sheet as opposed to recording premiums written or losses incurred in the statement of operations. Non-refundable fees on deposit contracts are earned based on the terms of the contract. Refer to Note 1 k).

Reinsurance recoverable includes the balances due from reinsurance companies for paid and unpaid losses and loss expenses and policy benefits that will be recovered from reinsurers, based on contracts in force. The method for determining the reinsurance recoverable on unpaid losses and loss expenses incurred but not reported (IBNR) involves actuarial estimates consistent with those used to establish the associated liability for unpaid losses and loss expenses as well as a determination of ACE's ability to cede unpaid losses and loss expenses.

Reinsurance recoverable is presented net of a provision for uncollectible reinsurance determined based upon a review of the financial condition of reinsurers and other factors. The provision for uncollectible reinsurance is based on an estimate of the amount of the reinsurance recoverable balance that will ultimately be unrecoverable due to reinsurer insolvency, a contractual dispute, or any other reason. The valuation of this provision includes several judgments including certain aspects of the allocation of reinsurance recoverable on IBNR claims by reinsurer and a default analysis to estimate uncollectible reinsurance. The primary components of the default analysis are reinsurance recoverable balances by reinsurer, net of collateral, and default factors used to determine the portion of a reinsurer's balance deemed uncollectible. The definition of collateral for this purpose requires some judgment and is generally limited to assets held in an ACE-only beneficiary trust, letters of credit, and liabilities held with the same legal entity for which ACE believes there is a contractual right of offset. The determination of the default factor is principally based on the financial strength rating of the reinsurer. Default factors require considerable judgment and are determined using the current financial strength rating, or rating equivalent, of each reinsurer as well as other key considerations and assumptions. The more significant considerations include, but are not necessarily limited to, the following:
•
For reinsurers that maintain a financial strength rating from a major rating agency, and for which recoverable balances are considered representative of the larger population (i.e., default probabilities are consistent with similarly rated reinsurers and payment durations conform to averages), the financial rating is based on a published source and the default factor is based on published default statistics of a major rating agency applicable to the reinsurer's particular rating class. When a recoverable is expected to be paid in a brief period of time by a highly rated reinsurer, such as certain property catastrophe claims, a default factor may not be applied;
•
For balances recoverable from reinsurers that are both unrated by a major rating agency and for which management is unable to determine a credible rating equivalent based on a parent, affiliate, or peer company, we determine a rating equivalent based on an analysis of the reinsurer that considers an assessment of the creditworthiness of the particular entity, industry benchmarks, or other factors as considered appropriate. We then apply the applicable default factor for that rating class. For balances recoverable from unrated reinsurers for which the ceded reserve is below a certain threshold, we generally apply a default factor of 34 percent, consistent with published statistics of a major rating agency;
•
For balances recoverable from reinsurers that are either insolvent or under regulatory supervision, we establish a default factor and resulting provision for uncollectible reinsurance based on reinsurer-specific facts and circumstances. Upon initial notification of an insolvency, we generally recognize an expense for a substantial portion of all balances outstanding, net of collateral, through a combination of write-offs of recoverable balances and increases to the provision for uncollectible reinsurance. When regulatory action is taken on a reinsurer, we generally recognize a default factor by estimating an expected recovery on all balances outstanding, net of collateral. When sufficient credible information becomes available, we adjust the provision for uncollectible reinsurance by establishing a default factor pursuant to information received; and
•
For other recoverables, management determines the provision for uncollectible reinsurance based on the specific facts and circumstances.

The methods used to determine the reinsurance recoverable balance and related provision for uncollectible reinsurance are regularly reviewed and updated and any resulting adjustments are reflected in earnings in the period identified.

Prepaid reinsurance premiums represent the portion of premiums ceded to reinsurers applicable to the unexpired coverage terms of the reinsurance contracts in force.

The value of reinsurance business assumed of $32 million and $35 million at December 31, 2012 and 2011, respectively, included in Other assets in the accompanying consolidated balance sheets, represents the excess of estimated ultimate value of the liabilities assumed under retroactive reinsurance contracts over consideration received. The value of reinsurance business assumed is amortized and recorded to losses and loss expenses based on the payment pattern of the losses assumed and ranges between 7 and 40 years. The unamortized value is reviewed regularly to determine if it is recoverable based upon the terms of the contract, estimated losses and loss expenses, and anticipated investment income. Unrecoverable amounts are expensed in the period identified.
Investments 
Investments
Fixed maturities are classified as either available for sale or held to maturity. The available for sale portfolio is reported at fair value. The held to maturity portfolio includes securities for which we have the ability and intent to hold to maturity or redemption and is reported at amortized cost. Equity securities are classified as available for sale and are recorded at fair value. Short-term investments comprise securities due to mature within one year of the date of purchase and are recorded at fair value which typically approximates cost. Short-term investments include certain cash and cash equivalents, which are part of investment portfolios under the management of external investment managers.

Other investments principally comprise life insurance policies, policy loans, trading securities, other direct equity investments, investment funds, and limited partnerships.

•
Life insurance policies are carried at policy cash surrender value.
•
Policy loans are carried at outstanding balance.
•
Trading securities are recorded on a trade date basis and carried at fair value. Unrealized gains and losses on trading securities are reflected in net income.
•
Other investments over which ACE can exercise significant influence are accounted for using the equity method.
•
All other investments over which ACE cannot exercise significant influence are carried at fair value with changes in fair value recognized through OCI. For these investments, investment income and realized gains are recognized as related distributions are received.
•
Partially-owned investment companies comprise entities in which we hold an ownership interest in excess of three percent. These investments as well as ACE's investments in investment funds where our ownership interest is in excess of three percent are accounted for under the equity method because ACE exerts significant influence. These investments apply investment company accounting to determine operating results, and ACE retains the investment company accounting in applying the equity method. This means that investment income, realized gains or losses, and unrealized gains or losses are included in the portion of equity earnings reflected in Other (income) expense.

Investments in partially-owned insurance companies primarily represent direct investments in which ACE has significant influence and, as such, meet the requirements for equity accounting. We report our share of the net income or loss of the partially-owned insurance companies in Other (income) expense. Investments in partially-owned insurance companies over which ACE does not exert significant influence are carried at fair value.

Realized gains or losses on sales of investments are determined on a first-in, first-out basis. Unrealized appreciation (depreciation) on investments is included as a separate component of AOCI in shareholders' equity. We regularly review our investments for OTTI. Refer to Note 3 for additional information.

With respect to securities where the decline in value is determined to be temporary and the security's value is not written down, a subsequent decision may be made to sell that security and realize a loss. Subsequent decisions on security sales are the result of changing or unforeseen facts and circumstances (i.e., arising from a large insured loss such as a catastrophe), deterioration of the creditworthiness of the issuer or its industry, or changes in regulatory requirements. We believe that subsequent decisions to sell such securities are consistent with the classification of the majority of the portfolio as available for sale.

We use derivative instruments including futures, options, swaps, and foreign currency forward contracts for the purpose of managing certain investment portfolio risks and exposures. Refer to Note 10 for additional information. Derivatives are reported at fair value and recorded in the accompanying consolidated balance sheets in Accounts payable, accrued expenses, and other liabilities with changes in fair value included in Net realized gains (losses) in the consolidated statements of operations. Collateral held by brokers equal to a percentage of the total value of open futures contracts is included in the investment portfolio.

Net investment income includes interest and dividend income and amortization of fixed maturity market premiums and discounts and is net of investment management and custody fees. For mortgage-backed securities, and any other holdings for which there is a prepayment risk, prepayment assumptions are evaluated and revised as necessary. Any adjustments required due to the resultant change in effective yields and maturities are recognized prospectively. Prepayment fees or call premiums that are only payable when a security is called prior to its maturity are earned when received and reflected in Net investment income. 

ACE participates in a securities lending program operated by a third party banking institution whereby certain assets are loaned to qualified borrowers and from which we earn an incremental return. Borrowers provide collateral, in the form of either cash or approved securities, of 102 percent of the fair value of the loaned securities.  Each security loan is deemed to be an overnight transaction.  Cash collateral is invested in a collateral pool which is managed by the banking institution.  The collateral pool is subject to written investment guidelines with key objectives which include the safeguard of principal and adequate liquidity to meet anticipated redemptions. The fair value of the loaned securities is monitored on a daily basis, with additional collateral obtained or refunded as the fair value of the loaned securities changes. The collateral is held by the third party banking institution, and the collateral can only be accessed in the event that the institution borrowing the securities is in default under the lending agreement. As a result of these restrictions, we consider our securities lending activities to be non-cash investing and financing activities. An indemnification agreement with the lending agent protects us in the event a borrower becomes insolvent or fails to return any of the securities on loan. The fair value of the securities on loan is included in fixed maturities and equity securities. The securities lending collateral is reported as a separate line in total assets with a related liability reflecting our obligation to return the collateral plus interest.

Similar to securities lending arrangements, securities sold under reverse repurchase agreements, whereby ACE sells securities and repurchases them at a future date for a predetermined price, are accounted for as collateralized investments and borrowings and are recorded at the contractual repurchase amounts plus accrued interest. Assets to be repurchased are the same, or substantially the same, as the assets transferred and the transferor, through right of substitution, maintains the right and ability to redeem the collateral on short notice. The fair value of the underlying securities is included in fixed maturities and equity securities. In contrast to securities lending programs, the use of cash received is not restricted. We report the obligation to return the cash as Short-term debt in the consolidated balance sheets.

Refer to Note 4 for a discussion on the determination of fair value for ACE's various investment securities.
Cash 
Cash
Cash includes cash on hand and deposits with an original maturity of three months or less at time of purchase. Cash held by external money managers is included in Short-term investments.

We have agreements with a third party bank provider which implemented two international multi-currency notional cash pooling programs. In each program, participating ACE entities establish deposit accounts in different currencies with the bank provider and each day the credit or debit balances in every account are notionally translated into a single currency (U.S. dollars) and then notionally pooled. The bank extends overdraft credit to any participating ACE entity as needed, provided that the overall notionally-pooled balance of all accounts in each pool at the end of each day is at least zero. Actual cash balances are not physically converted and are not commingled between legal entities. Any overdraft balances incurred under this program by an ACE entity would be guaranteed by ACE Limited (up to $300 million in the aggregate). Our syndicated letter of credit facility allows for same day drawings to fund a net pool overdraft should participating ACE entities withdraw contributed funds from the pool.
Goodwill and other intangible assets 
Goodwill and other intangible assets
Goodwill represents the excess of the cost of acquisitions over the fair value of net assets acquired and is not amortized. Goodwill is assigned at acquisition to the applicable reporting unit of the acquired entities giving rise to the goodwill. Goodwill impairment tests are performed annually, or more frequently if circumstances indicate a possible impairment.  For goodwill impairment testing, we use a qualitative assessment to determine whether it is more likely than not (i.e., more than a 50 percent probability) that the fair value of a reporting unit is greater than its carrying amount. If our assessment indicates less than a 50 percent probability that fair value exceeds carrying value, we quantitatively estimate a reporting unit's fair value using a consistently applied combination of the following models: an earnings multiple, a book value multiple, a discounted cash flow, or an allocated market capitalization model. The earnings and book value models apply multiples of comparable publicly traded companies to forecasted earnings or book value of each reporting unit and consider current market transactions. The discounted cash flow model applies a discount to estimated cash flows including a terminal value calculation. The market capitalization model allocates market capitalization to each reporting unit. Where appropriate, we consider the impact of a control premium. Goodwill recorded in connection with investments in partially-owned insurance companies is recorded in Investments in partially-owned insurance companies and is also measured for impairment annually.

Indefinite lived intangible assets are not subject to amortization. Finite lived intangible assets are amortized over their useful lives, generally ranging from 4 to 20 years. The amortization of finite lived intangible assets is reported in Other (income) expense in the consolidated statements of operations. The carrying amounts of intangible assets are regularly reviewed for indicators of impairment. Impairment is recognized if the carrying amount is not recoverable from its undiscounted cash flows and is measured as the difference between the carrying amount and fair value.
Unpaid losses and loss expenses 
Unpaid losses and loss expenses
A liability is established for the estimated unpaid losses and loss expenses under the terms of, and with respect to, ACE's policies and agreements. These amounts include provision for both reported claims (case reserves) and IBNR claims. The methods of determining such estimates and establishing the resulting liability are reviewed regularly and any adjustments are reflected in operations in the period in which they become known. Future developments may result in losses and loss expenses materially greater or less than recorded amounts.

Except for net loss and loss expense reserves of $58 million net of discount, held at December 31, 2012, representing certain structured settlements for which the timing and amount of future claim payments are reliably determinable and $47 million net of discount of certain reserves for unsettled claims that are discounted in statutory filings, ACE does not discount its P&C loss reserves. This compares with reserves of $59 million for certain structured settlements and $35 million of certain reserves for unsettled claims at December 31, 2011. Structured settlements represent contracts purchased from life insurance companies primarily to settle workers' compensation claims, where payments to the claimant by the life insurance company are expected to be made in the form of an annuity. ACE retains the liability to the claimant in the event that the life insurance company fails to pay. At December 31, 2012, the gross liability for the amount due to claimants was $640 million net of discount and reinsurance recoverables for amounts due from the life insurance companies was $582 million net of discount. For structured settlement contracts where payments are guaranteed regardless of claimant life expectancy, the amounts recoverable from the life insurance companies at December 31, 2012 are included in Other assets in the consolidated balance sheets, as they do not meet the requirements for reinsurance accounting.

Included in unpaid losses and loss expenses are liabilities for asbestos and environmental (A&E) claims and expenses. These unpaid losses and loss expenses are principally related to claims arising from remediation costs associated with hazardous waste sites and bodily-injury claims related to asbestos products and environmental hazards. The estimation of these liabilities is particularly sensitive to changes in the legal environment, including specific settlements that may be used as precedents to settle future claims. However, ACE does not anticipate future changes in laws and regulations in setting its A&E reserve levels.

Prior period development arises from changes to loss estimates recognized in the current year that relate to loss reserves first reported in previous calendar years and excludes the effect of losses from the development of earned premiums from previous accident years. With respect to crop business, prior to the December 2010 acquisition of Rain and Hail Insurance Service, Inc. (Rain and Hail), reports relating to the previous crop year(s) were normally received in subsequent calendar years and this typically resulted in adjustments to the previously reported premiums, losses and loss expenses, and profit share commission.  Following the acquisition, such information is available before the close of the calendar year.

For purposes of analysis and disclosure, management views prior period development to be changes in the nominal value of loss estimates from period to period, net of premium and profit commission adjustments on loss sensitive contracts. Prior period development excludes changes in loss estimates that do not arise from the emergence of claims, such as those related to uncollectible reinsurance, interest, unallocated loss adjustment expenses, or foreign currency. Accordingly, specific items excluded from prior period development include the following: gains/losses related to foreign currency remeasurement; losses recognized from the early termination or commutation of reinsurance agreements that principally relate to the time value of money; changes in the value of reinsurance business assumed reflected in losses incurred but principally related to the time value of money; and losses that arise from changes in estimates of earned premiums from prior accident years. Except for foreign currency remeasurement, which is disclosed separately, these items are included in current year losses.
Future policy benefits 
Future policy benefits
The valuation of long duration contract reserves requires management to make estimates and assumptions regarding expenses, mortality, persistency, and investment yields. Such estimates are primarily based on historical experience and information provided by ceding companies and include a margin for adverse deviation. Interest rates used in calculating reserves range from less than 1.0 percent to 4.5 percent and less than 1.0 percent to 6.0 percent at December 31, 2012 and 2011, respectively. Actual results could differ materially from these estimates. Management monitors actual experience, and where circumstances warrant, will revise assumptions and the related reserve estimates. Revisions are recorded in the period they are determined.

Certain of our long duration contracts are supported by assets that do not qualify for separate account reporting under GAAP. These assets are classified as trading securities and reported in Other investments and the offsetting liabilities are reported in Future policy benefits in the consolidated balance sheets. Changes in the fair value of separate account assets that do not quality for separate account reporting under GAAP are reported in Other income (expense) and the offsetting movements in the liabilities are included in Policy benefits in the consolidated statements of operations.
Assumed reinsurance programs involving minimum benefit guarantees under annuity contracts 
Assumed reinsurance programs involving minimum benefit guarantees under annuity contracts
ACE reinsures various death and living benefit guarantees associated with variable annuities issued primarily in the United States and Japan. Each reinsurance treaty covers variable annuities written during a limited period, typically not exceeding two years. We generally receive a monthly premium during the accumulation phase of the covered annuities (in-force) based on a percentage of either the underlying accumulated account values or the underlying accumulated guaranteed values. Depending on an annuitant's age, the accumulation phase can last many years. To limit our exposure under these programs, all reinsurance treaties include aggregate claim limits and many include an aggregate deductible.

The guarantees which are payable on death, referred to as guaranteed minimum death benefits (GMDB), principally cover shortfalls between accumulated account value at the time of an annuitant's death and either i) an annuitant's total deposits; ii) an annuitant's total deposits plus a minimum annual return; or iii) the highest accumulated account value attained at any policy anniversary date. In addition, a death benefit may be based on a formula specified in the variable annuity contract that uses a percentage of the growth of the underlying contract value. Liabilities for GMDBs are based on cumulative assessments or premiums to date multiplied by a benefit ratio that is determined by estimating the present value of benefit payments and related adjustment expenses divided by the present value of cumulative assessment or expected premiums during the contract period.  

Under reinsurance programs covering GLBs, we assume the risk of guaranteed minimum income benefits (GMIB) and guaranteed minimum accumulation benefits (GMAB) associated with variable annuity contracts. The GMIB risk is triggered if, at the time the contract holder elects to convert the accumulated account value to a periodic payment stream (annuitize), the accumulated account value is not sufficient to provide a guaranteed minimum level of monthly income. The GMAB risk is triggered if, at contract maturity, the contract holder's account value is less than a guaranteed minimum value. Our GLB reinsurance product meets the definition of a derivative for accounting purposes and is carried at fair value with changes in fair value recognized in income and classified as described below. As the assuming entity, we are obligated to provide coverage until the earlier of the expiration of the underlying guaranteed benefit or the treaty expiration date. Premiums received under the reinsurance treaties are classified as premium. Expected losses allocated to premiums received are classified as policy benefits and valued similar to GMDB reinsurance. Other changes in fair value, principally arising from changes in expected losses allocated to expected future premiums, are classified as Net realized gains (losses). Fair value represents management's estimate of exit price and thus includes a risk margin. We may recognize a realized loss for other changes in fair value due to adverse changes in the capital markets (i.e., declining interest rates and/or declining equity markets) and changes in policyholder behavior (i.e., increased annuitization or decreased lapse rates) although we expect the business to be profitable. We believe this presentation provides the most meaningful disclosure of changes in the underlying risk within the GLB reinsurance programs for a given reporting period.
Deposit assets and liabilities 
Deposit assets and liabilities
Deposit assets arise from ceded reinsurance contracts purchased that do not transfer significant underwriting or timing risk. Under deposit accounting, consideration received or paid, excluding non-refundable fees, is recorded as a deposit asset or liability in the balance sheet as opposed to recording premiums and losses in the statement of operations. Interest income on deposits, representing the consideration received or to be received in excess of cash payments related to the deposit contract, is earned based on an effective yield calculation. The calculation of the effective yield is based on the amount and timing of actual cash flows at the balance sheet date and the estimated amount and timing of future cash flows. The effective yield is recalculated periodically to reflect revised estimates of cash flows. When a change in the actual or estimated cash flows occurs, the resulting change to the carrying amount of the deposit asset is reported as income or expense. Deposit assets of $138 million and $133 million at December 31, 2012 and 2011, respectively, are reflected in Other assets in the consolidated balance sheets and the accretion of deposit assets related to interest pursuant to the effective yield calculation is reflected in Net investment income in the consolidated statements of operations.

Non-refundable fees are earned based on contract terms. Non-refundable fees paid but unearned are reflected in Other assets in the consolidated balance sheets and earned fees are reflected in Other (income) expense in the consolidated statements of operations.

Deposit liabilities include reinsurance deposit liabilities of $283 million and $318 million and contract holder deposit funds of $548 million and $345 million at December 31, 2012 and 2011, respectively. Deposit liabilities are reflected in Accounts payable, accrued expenses, and other liabilities in the consolidated balance sheets. The reinsurance deposit liabilities arise from contracts sold for which there is not a significant transfer of risk. At contract inception, the deposit liability equals net cash received. An accretion rate is established based on actuarial estimates whereby the deposit liability is increased to the estimated amount payable over the contract term. The deposit accretion rate is the rate of return required to fund expected future payment obligations. We periodically reassess the estimated ultimate liability and related expected rate of return. Changes to the amount of the deposit liability are generally reflected through Interest expense to reflect the cumulative effect of the period the contract has been in force, and by an adjustment to the future accretion rate of the liability over the remaining estimated contract term.

Contract holder deposit funds represent a liability for investment contracts sold that do not meet the definition of an insurance contract and are sold with a guaranteed rate of return. The liability equals accumulated policy account values, which consist of the deposit payments plus credited interest, less withdrawals and amounts assessed through the end of the period.
Foreign currency remeasurement and translation 
Foreign currency remeasurement and translation
The functional currency for each of our foreign operations is generally the currency of the local operating environment. Transactions in currencies other than a foreign operation's functional currency are remeasured into the functional currency and the resulting foreign exchange gains and losses are reflected in Net realized gains (losses) in the consolidated statements of operations. Functional currency assets and liabilities are translated into the reporting currency, U.S. dollars, using period end rates of exchange and the related translation adjustments are recorded as a separate component of AOCI. Functional statement of operations amounts expressed in functional currencies are translated using average exchange rates. Gains and losses resulting from foreign currency transactions are recorded in Net realized gains (losses) in the consolidated statements of operations.
Administrative expenses 
Administrative expenses
Administrative expenses generally include all operating costs other than policy acquisition costs. The Insurance – North American segment manages and uses an in-house third-party claims administrator, ESIS Inc. (ESIS).  ESIS performs claims management and risk control services for domestic and international organizations that self-insure P&C exposures as well as internal P&C exposures.  The net operating results of ESIS are included within Administrative expenses in the consolidated statements of operations and were $23 million, $21 million, and $85 million for the years ended December 31, 2012, 2011, and 2010, respectively.
Income taxes 
Income taxes
Income taxes have been recorded related to those operations subject to income taxes. Deferred tax assets and liabilities result from temporary differences between the amounts recorded in the consolidated financial statements and the tax basis of our assets and liabilities. Refer to Note 8 for additional information. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance against deferred tax assets is recorded if it is more likely than not that all, or some portion, of the benefits related to deferred tax assets will not be realized. The valuation allowance assessment considers tax planning strategies, where applicable.

We recognize uncertain tax positions deemed more likely than not of being sustained upon examination.  Recognized income tax positions are measured at the largest amount that is greater than 50 percent likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
Earnings per share 
Earnings per share
Basic earnings per share is calculated using the weighted-average shares outstanding including participating securities with non-forfeitable rights to dividends such as unvested restricted stock. All potentially dilutive securities including stock options are excluded from the basic earnings per share calculation. In calculating diluted earnings per share, the weighted-average shares outstanding is increased to include all potentially dilutive securities. Basic and diluted earnings per share are calculated by dividing net income available to common shareholders by the applicable weighted-average number of shares outstanding during the year.
Cash flow information 
Cash flow information
Premiums received and losses paid associated with the GLB reinsurance products, which as discussed previously meet the definition of a derivative instrument for accounting purposes, are included within cash flows from operating activities in the consolidated statement of cash flows.  Cash flows, such as settlements and collateral requirements, associated with GLB and all other derivative instruments are included on a net basis within cash flows from investing activities in the consolidated statement of cash flows. Purchases, sales, and maturities of short-term investments are recorded net for purposes of the consolidated statements of cash flows and are classified with cash flows related to fixed maturities.

Derivatives 
Derivatives
ACE recognizes all derivatives at fair value in the consolidated balance sheets and participates in derivative instruments in two principal ways:

(i) To sell protection to customers as an insurance or reinsurance contract that meets the definition of a derivative for accounting purposes. For 2012 and 2011, the reinsurance of GLBs was our primary product falling into this category; and
(ii) To mitigate financial risks, principally arising from investment holdings, products sold, or assets and liabilities held in foreign currencies. For these instruments, changes in assets or liabilities measured at fair value are recorded as realized gains or losses in the consolidated statement of operations.

We did not designate any derivatives as accounting hedges during 2012, 2011, or 2010.
Share-based compensation 
Share-based compensation
ACE measures and records compensation cost for all share-based payment awards at grant-date fair value. Compensation costs are recognized for share-based payment awards with only service conditions that have graded vesting schedules on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards. Refer to Note 12 for additional information.
New accounting pronouncements 
New accounting pronouncements
Adopted in 2012
Accounting for costs associated with acquiring or renewing insurance contracts
In October 2010, the Financial Accounting Standards Board (FASB) issued new guidance related to the accounting for costs associated with acquiring or renewing insurance contracts. Under the new guidance, the definition of acquisition costs was modified to specify that a cost must be directly related to the successful acquisition of a new or renewal insurance contract in order to be deferred. We adopted this guidance retrospectively effective January 1, 2012 and reduced Retained earnings as of January 1, 2010 by $116 million which represents the cumulative effect of adjustment resulting from adoption of new accounting guidance. We adjusted prior year amounts contained in this report to reflect the effect of adjustment from adoption of new accounting guidance including reducing Deferred policy acquisition costs and Retained earnings by $213 million and $181 million, respectively, as of December 31, 2011. The reduction to Deferred policy acquisition costs is primarily due to lower deferrals associated with unsuccessful efforts. We also reduced Net income by $45 million, or $0.13 per share, and $23 million, or $0.07 per share, for the years ended December 31, 2011 and 2010, respectively.

Fair value measurements
In May 2011, the FASB issued new guidance on fair value measurements to revise the wording used to describe the requirements for measuring fair value and for disclosing information about fair value measurements.  The guidance is not necessarily intended to result in a significant change in the application of the current requirements.  Instead, it is intended to clarify the application of existing fair value measurement requirements.  It also changes certain principles or requirements for measuring fair value and disclosing information about fair value measurements. We adopted this guidance prospectively effective January 1, 2012. The application of this guidance resulted in additional fair value measurements disclosures only and did not impact our financial condition or results of operations. 

Adopted in 2011
Testing goodwill for impairment
In September 2011, the FASB issued new accounting guidance which eliminates the requirement to calculate the fair value of reporting units at least annually and replaces it with an optional qualitative assessment. This guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted.  We adopted this guidance on October 1, 2011. The application of the new guidance resulted in a change in the procedures for assessing goodwill impairment, and did not impact our financial condition or results of operations. 

Investments (Tables)
Schedule Of Amortized Cost And Fair Value Of Fixed Maturities And Related OTTI Recognized In AOCI 
The following tables present the amortized cost and fair value of fixed maturities and related OTTI recognized in AOCI:
December 31, 2012
Amortized
Cost

 
Gross
Unrealized
Appreciation

 
Gross
Unrealized
Depreciation

 
Fair
Value

 
OTTI Recognized
in AOCI

(in millions of U.S. dollars)
 
 
 
 
Available for sale
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency
$
3,553

 
$
183

 
$
(1
)
 
$
3,735

 
$
—

Foreign
13,016

 
711

 
(14
)
 
13,713

 
—

Corporate securities
15,529

 
1,210

 
(31
)
 
16,708

 
(7
)
Mortgage-backed securities
10,051

 
458

 
(36
)
 
10,473

 
(84
)
States, municipalities, and political subdivisions
2,517

 
163

 
(3
)
 
2,677

 
—

 
$
44,666

 
$
2,725

 
$
(85
)
 
$
47,306

 
$
(91
)
Held to maturity
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency
$
1,044

 
$
39

 
$
—

 
$
1,083

 
$
—

Foreign
910

 
54

 
—

 
964

 
—

Corporate securities
2,133

 
142

 
—

 
2,275

 
—

Mortgage-backed securities
2,028

 
88

 
—

 
2,116

 
—

States, municipalities, and political subdivisions
1,155

 
44

 
(4
)
 
1,195

 
—

 
$
7,270

 
$
367

 
$
(4
)
 
$
7,633

 
$
—

 
 
 
 
 
 
 
 
 
 
December 31, 2011
Amortized
Cost

 
Gross
Unrealized
Appreciation

 
Gross
Unrealized
Depreciation

 
Fair
Value

 
OTTI Recognized
in AOCI

(in millions of U.S. dollars)
 
 
 
 
Available for sale
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency
$
2,774

 
$
186

 
$
—

 
$
2,960

 
$
—

Foreign
12,025

 
475

 
(99
)
 
12,401

 
(2
)
Corporate securities
14,055

 
773

 
(135
)
 
14,693

 
(22
)
Mortgage-backed securities
9,979

 
397

 
(175
)
 
10,201

 
(151
)
States, municipalities, and political subdivisions
1,617

 
96

 
(1
)
 
1,712

 
—

 
$
40,450

 
$
1,927

 
$
(410
)
 
$
41,967

 
$
(175
)
Held to maturity
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency
$
1,078

 
$
48

 
$
—

 
$
1,126

 
$
—

Foreign
935

 
18

 
(23
)
 
930

 
—

Corporate securities
2,338

 
44

 
(45
)
 
2,337

 
—

Mortgage-backed securities
2,949

 
90

 
(3
)
 
3,036

 
—

States, municipalities, and political subdivisions
1,147

 
32

 
(3
)
 
1,176

 
—

 
$
8,447

 
$
232

 
$
(74
)
 
$
8,605

 
$
—

Schedule Of Fixed Maturities By Contractual Maturity 
The following table presents fixed maturities by contractual maturity: 
 
December 31
 
 
December 31
 
 
 
 
2012

 
 
 
2011

(in millions of U.S. dollars)
Amortized Cost

 
Fair Value

 
Amortized Cost

 
Fair Value

Available for sale
 
 
 
 
 
 
 
Due in 1 year or less
$
1,887

 
$
1,906

 
$
2,321

 
$
2,349

Due after 1 year through 5 years
13,411

 
14,010

 
12,325

 
12,722

Due after 5 years through 10 years
15,032

 
16,153

 
12,379

 
12,995

Due after 10 years
4,285

 
4,764

 
3,446

 
3,700

 
34,615

 
36,833

 
30,471

 
31,766

Mortgage-backed securities
10,051

 
10,473

 
9,979

 
10,201

 
$
44,666

 
$
47,306

 
$
40,450

 
$
41,967

Held to maturity
 
 
 
 
 
 
 
Due in 1 year or less
$
656

 
$
659

 
$
393

 
$
396

Due after 1 year through 5 years
1,870

 
1,950

 
2,062

 
2,090

Due after 5 years through 10 years
2,119

 
2,267

 
2,376

 
2,399

Due after 10 years
597

 
641

 
667

 
684

 
5,242

 
5,517

 
5,498

 
5,569

Mortgage-backed securities
2,028

 
2,116

 
2,949

 
3,036

 
$
7,270

 
$
7,633

 
$
8,447

 
$
8,605

Schedule Of Cost And Fair Value Of Equity Securities 
The following table presents the cost and fair value of equity securities:
 
December 31


December 31

(in millions of U.S. dollars)
2012


2011

Cost
$
707

 
$
671

Gross unrealized appreciation
41

 
18

Gross unrealized depreciation
(4
)
 
(42
)
Fair value
$
744

 
$
647

Schedule Of Default Assumptions By Moody's Rating Category 
The following table presents default assumptions by Moody's rating category (historical mean default rate provided for comparison):
Moody's Rating Category
1-in-100 Year Default Rate

 
Historical Mean Default Rate

Investment Grade:
 
 
 
Aaa-Baa
0.0-1.4%

 
0.0-0.3%

Below Investment Grade:
 
 
 
Ba
4.9
%
 
1.1
%
B
12.8
%
 
3.4
%
Caa-C
53.4
%
 
13.8
%
Schedule Of Significant Assumptions For Future Cash Flows For Mortgage Backed Securities 

Schedule Of Net Realized Gains (Losses) And The Losses Included In Net Realized Gains (Losses) And OCI 
The following table presents the Net realized gains (losses) and the losses included in Net realized gains (losses) and OCI as a result of conditions which caused us to conclude the decline in fair value of certain investments was “other-than-temporary” and the change in net unrealized appreciation (depreciation) of investments: 
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

Fixed maturities:
 
 
 
 
 
OTTI on fixed maturities, gross
$
(26
)
 
$
(61
)
 
$
(115
)
OTTI on fixed maturities recognized in OCI (pre-tax)
1

 
15

 
69

OTTI on fixed maturities, net
(25
)
 
(46
)
 
(46
)
Gross realized gains excluding OTTI
388

 
410

 
569

Gross realized losses excluding OTTI
(133
)
 
(200
)
 
(143
)
Total fixed maturities
230

 
164

 
380

Equity securities:
 
 
 
 
 
OTTI on equity securities
(5
)
 
(1
)
 
—

Gross realized gains excluding OTTI
11

 
15

 
86

Gross realized losses excluding OTTI
(2
)
 
(5
)
 
(2
)
Total equity securities
4

 
9

 
84

OTTI on other investments
(7
)
 
(3
)
 
(13
)
Foreign exchange losses
(16
)
 
(13
)
 
(54
)
Investment and embedded derivative instruments
(6
)
 
(143
)
 
58

Fair value adjustments on insurance derivative
171

 
(779
)
 
(28
)
S&P put options and futures
(297
)
 
(4
)
 
(150
)
Other derivative instruments
(4
)
 
(4
)
 
(19
)
Other
3

 
(22
)
 
174

Net realized gains (losses)
78

 
(795
)
 
432

Change in net unrealized appreciation (depreciation) on investments:
 
 
 
 
 
Fixed maturities available for sale
1,099

 
569

 
451

Fixed maturities held to maturity
(94
)
 
(89
)
 
522

Equity securities
61

 
(47
)
 
(44
)
Other
50

 
40

 
(35
)
Income tax expense
(198
)
 
(157
)
 
(152
)
Change in net unrealized appreciation on investments
918

 
316

 
742

Total net realized gains (losses) and change in net unrealized appreciation (depreciation) on investments
$
996

 
$
(479
)
 
$
1,174

Schedule Of Roll-Forward Of Pre-Tax Credit Losses Related To Fixed Maturities For Which A Portion Of OTTI Was Recognized In OCI 
The following table presents a roll-forward of pre-tax credit losses related to fixed maturities for which a portion of OTTI was recognized in OCI: 
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

Balance of credit losses related to securities still held – beginning of year
$
74

 
$
137

 
$
174

Additions where no OTTI was previously recorded
8

 
12

 
34

Additions where an OTTI was previously recorded
12

 
8

 
12

Reductions for securities sold during the period
(51
)
 
(83
)
 
(83
)
Balance of credit losses related to securities still held – end of year
$
43

 
$
74

 
$
137

Schedule Of Other Investments 
The following table presents the fair value and cost of other investments:
 
 
 
December 31

 
 
 
December 31

 
 
 
2012

 
 
 
2011

(in millions of U.S. dollars)
Fair Value

 
Cost

 
Fair Value

 
Cost

Investment funds
$
395

 
$
278

 
$
378

 
$
277

Limited partnerships
531

 
398

 
531

 
429

Partially-owned investment companies
1,186

 
1,187

 
904

 
904

Life insurance policies
148

 
148

 
127

 
127

Policy loans
164

 
164

 
143

 
143

Trading securities
243

 
242

 
194

 
195

Other
49

 
48

 
37

 
37

Total
$
2,716

 
$
2,465

 
$
2,314

 
$
2,112

Schedule Of Partially Owned Insurance Companies 
The following table presents Investments in partially-owned insurance companies:
 
December 31
 
 
December 31
 
 
 
 
2012
 
 
2011
 
 
 
(in millions of U.S. dollars, except percentages)
Carrying Value

 
Issued Share Capital

 
Ownership Percentage

 
Carrying Value

 
Issued Share Capital

 
Ownership Percentage

 
Domicile
Huatai Group
$
350

(1) 
$
474

 
20.0
%
 
$
228

 
$
457

 
20.0
%
 
China
Huatai Life Insurance Company
84

 
205

 
20.0
%
 
103

 
196

 
20.0
%
 
China
Freisenbruch-Meyer
9

 
6

 
40.0
%
 
8

 
5

 
40.0
%
 
Bermuda
ACE Cooperative Ins. Co. - Saudi Arabia
9

 
27

 
30.0
%
 
7

 
27

 
30.0
%
 
Saudi Arabia
Russian Reinsurance Company
2

 
4

 
23.3
%
 
2

 
4

 
23.3
%
 
Russia
Island Heritage
—

 
—

 
—

 
4

 
27

 
10.8
%
 
Cayman Islands
Total
$
454

 
$
716

 
 
 
$
352

 
$
716

 
 
 
 
Schedule Of Aggregate Fair Value And Gross Unrealized Loss By Length Of Time The Security Has Continuously Been In An Unrealized Loss Position 
The following tables present, for all securities in an unrealized loss position (including securities on loan), the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:
 
0 – 12 Months
 
 
Over 12 Months
 
 
Total
 
December 31, 2012
Fair Value

 
Gross
Unrealized Loss

 
Fair Value

 
Gross
Unrealized Loss

 
Fair Value

 
Gross
Unrealized Loss

(in millions of U.S. dollars)
 
 
 
 
 
U.S. Treasury and agency
$
440

 
$
(1.4
)
 
$
—

 
$
—

 
$
440

 
$
(1.4
)
Foreign
1,234

 
(8.6
)
 
88

 
(5.8
)
 
1,322

 
(14.4
)
Corporate securities
1,026

 
(22.7
)
 
85

 
(7.9
)
 
1,111

 
(30.6
)
Mortgage-backed securities
855

 
(3.8
)
 
356

 
(32.6
)
 
1,211

 
(36.4
)
States, municipalities, and political subdivisions
316

 
(3.0
)
 
48

 
(3.6
)
 
364

 
(6.6
)
Total fixed maturities
3,871

 
(39.5
)
 
577

 
(49.9
)
 
4,448

 
(89.4
)
Equity securities
29

 
(4.2
)
 
—

 
—

 
29

 
(4.2
)
Other investments
68

 
(4.9
)
 
—

 
—

 
68

 
(4.9
)
Total
$
3,968

 
$
(48.6
)
 
$
577

 
$
(49.9
)
 
$
4,545

 
$
(98.5
)
 
 
0 – 12 Months
 
 
Over 12 Months
 
 
Total
 
December 31, 2011
Fair Value

 
Gross
Unrealized Loss

 
Fair Value

 
Gross
Unrealized Loss

 
Fair Value

 
Gross
Unrealized Loss

(in millions of U.S. dollars)
 
 
 
 
 
Foreign
$
1,801

 
$
(82.2
)
 
$
529

 
$
(40.0
)
 
$
2,330

 
$
(122.2
)
Corporate securities
3,084

 
(148.2
)
 
268

 
(32.2
)
 
3,352

 
(180.4
)
Mortgage-backed securities
440

 
(7.5
)
 
586

 
(170.2
)
 
1,026

 
(177.7
)
States, municipalities, and political subdivisions
30

 
(0.4
)
 
98

 
(3.5
)
 
128

 
(3.9
)
Total fixed maturities
5,355

 
(238.3
)
 
1,481

 
(245.9
)
 
6,836

 
(484.2
)
Equity securities
484

 
(42.3
)
 
—

 
—

 
484

 
(42.3
)
Other investments
88

 
(8.3
)
 
—

 
—

 
88

 
(8.3
)
Total
$
5,927

 
$
(288.9
)
 
$
1,481

 
$
(245.9
)
 
$
7,408

 
$
(534.8
)
Schedule Of Sources Of Net Investment Income 
The following table presents the sources of net investment income:
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

Fixed maturities
$
2,134

 
$
2,196

 
$
2,071

Short-term investments
28

 
43

 
34

Equity securities
34

 
36

 
26

Other
104

 
62

 
44

Gross investment income
2,300

 
2,337

 
2,175

Investment expenses
(119
)
 
(95
)
 
(105
)
Net investment income
$
2,181

 
$
2,242

 
$
2,070

Schedule Of Components Of Restricted Assets 
The following table presents the components of restricted assets: 
 
December 31

 
December 31

(in millions of U.S. dollars)
2012

 
2011

Trust funds
$
11,389

 
$
9,940

Deposits with non-U.S. regulatory authorities
2,133

 
2,240

Assets pledged under reverse repurchase agreements
1,401

 
1,251

Deposits with U.S. regulatory authorities
1,338

 
1,307

Other pledged assets
456

 
364

 
$
16,717

 
$
15,102

Fair value measurements (Tables)
Financial Instruments Measured At Fair Value On A Recurring Basis 
The following tables present, by valuation hierarchy, the financial instruments measured at fair value on a recurring basis: 
December 31, 2012
Level 1

 
Level 2

 
Level 3

 
Total

(in millions of U.S. dollars)
 
 
 
Assets:
 
 
 
 
 
 
 
Fixed maturities available for sale
 
 
 
 
 
 
 
U.S. Treasury and agency
$
2,050

 
$
1,685

 
$
—

 
$
3,735

Foreign
222

 
13,431

 
60

 
13,713

Corporate securities
20

 
16,586

 
102

 
16,708

Mortgage-backed securities
—

 
10,460

 
13

 
10,473

States, municipalities, and political subdivisions
—

 
2,677

 
—

 
2,677

 
2,292

 
44,839

 
175

 
47,306

Equity securities
253

 
488

 
3

 
744

Short-term investments
1,503

 
725

 
—

 
2,228

Other investments
268

 
196

 
2,252

 
2,716

Securities lending collateral
—

 
1,791

 
—

 
1,791

Investment derivative instruments
11

 
—

 
—

 
11

Other derivative instruments
(6
)
 
30

 
—

 
24

Separate account assets
872

 
71

 
—

 
943

Total assets measured at fair value
$
5,193

 
$
48,140

 
$
2,430

 
$
55,763

Liabilities:
 
 
 
 
 
 
 
GLB(1)
$
—

 
$
—

 
$
1,119

 
$
1,119

(1) 
Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. Refer to Note 5 c) for additional information.

 
December 31, 2011
Level 1

 
Level 2

 
Level 3

 
Total

(in millions of U.S. dollars)
 
 
 
Assets:
 
 
 
 
 
 
 
Fixed maturities available for sale
 
 
 
 
 
 
 
U.S. Treasury and agency
$
1,691

 
$
1,264

 
$
5

 
$
2,960

Foreign
212

 
12,156

 
33

 
12,401

Corporate securities
20

 
14,539

 
134

 
14,693

Mortgage-backed securities
—

 
10,173

 
28

 
10,201

States, municipalities, and political subdivisions
—

 
1,711

 
1

 
1,712

 
1,923

 
39,843

 
201

 
41,967

Equity securities
215

 
419

 
13

 
647

Short-term investments
1,246

 
1,055

 
—

 
2,301

Other investments
208

 
229

 
1,877

 
2,314

Securities lending collateral
—

 
1,375

 
—

 
1,375

Investment derivative instruments
10

 
—

 
—

 
10

Other derivative instruments
(16
)
 
54

 
3

 
41

Separate account assets
607

 
53

 
—

 
660

Total assets measured at fair value
$
4,193

 
$
43,028

 
$
2,094

 
$
49,315

Liabilities:
 
 
 
 
 
 
 
GLB(1)
$
—

 
$
—

 
$
1,319

 
$
1,319

(1) 
Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. Refer to Note 5 c) for additional information.
Fair Value And Maximum Future Funding Commitments Related To Investments 
The following table presents, by investment category, the expected liquidation period, fair value, and maximum future funding commitments of alternative investments: 
 
 
 
December 31
 
 
December 31
 
 
 
 
2012
 
 
2011
 
(in millions of U.S. dollars)
Expected
Liquidation
Period
 
Fair Value

 
Maximum
Future Funding
Commitments

 
Fair Value

 
Maximum
Future Funding
Commitments

Financial
5 to 9 Years
 
$
225

 
$
111

 
$
205

 
$
141

Real estate
3 to 9 Years
 
292

 
62

 
270

 
96

Distressed
6 to 9 Years
 
192

 
152

 
182

 
57

Mezzanine
6 to 9 Years
 
284

 
279

 
195

 
282

Traditional
3 to 8 Years
 
711

 
587

 
565

 
200

Vintage
1 to 3 Years
 
14

 
—

 
18

 
1

Investment funds
Not Applicable
 
395

 
—

 
378

 
—

 
 
 
$
2,113

 
$
1,191

 
$
1,813

 
$
777

Schedule Of Significant Unobservable Inputs Used In Level 3 Liability Valuations 
The following table presents the significant unobservable inputs used in the Level 3 liability valuations. Excluded from the table below are inputs used to fair value Level 3 assets which are based on single broker quotes or net asset value and contain no quantitative unobservable inputs developed by management.
(in millions of U.S. dollars)
Fair Value at
December 31, 2012

 
Valuation
Technique
 
Significant
Unobservable Inputs
 
Ranges
GLB(1)
$
1,119

 
Actuarial model
 
Lapse rate
 
1% - 30%
 
 
 
 
 
Annuitization rate
 
0% - 50%
(1) 
Discussion of the most significant inputs used in the fair value measurement of GLB and the sensitivity of those assumptions is included within Note 4 a) Guaranteed living benefits.
Financial Instruments Measured At Fair Value Using Significant Unobservable Inputs 
The following tables present a reconciliation of the beginning and ending balances of financial instruments measured at fair value using significant unobservable inputs (Level 3): 
 
Assets
 
 
Liabilities

 
Available-for-Sale Debt Securities
 
 
Equity
securities

 
Other
investments

 
Other
derivative
instruments

 
GLB(1)

Year Ended December 31, 2012
U.S.
Treasury
and
agency

 
Foreign

 
Corporate
securities

 
MBS

 
States,
municipalities,
and political
subdivisions

 
(in millions of U.S. dollars)
 
 
 
 
 
Balance-Beginning of year
$
5

 
$
33

 
$
134

 
$
28

 
$
1

 
$
13

 
$
1,877

 
$
3

 
$
1,319

Transfers into Level 3
—

 
49

 
37

 
22

 
1

 
2

 
53

 
—

 
—

Transfers out of Level 3
(4
)
 
(13
)
 
(46
)
 
(35
)
 
(1
)
 
(11
)
 
—

 
—

 
—

Change in Net Unrealized Gains (Losses) included in OCI
—

 
(1
)
 
6

 
—

 
—

 
—

 
55

 
—

 
—

Net Realized Gains/Losses
—

 
—

 
(1
)
 
—

 
—

 
—

 
(7
)
 
(4
)
 
(200
)
Purchases
—

 
46

 
24

 
9

 
—

 
4

 
520

 
3

 
—

Sales
—

 
(53
)
 
(19
)
 
(7
)
 
—

 
(5
)
 
(9
)
 
—

 
—

Settlements
(1
)
 
(1
)
 
(33
)
 
(4
)
 
(1
)
 
—

 
(237
)
 
(2
)
 
—

Balance-End of Year
$
—

 
$
60

 
$
102

 
$
13

 
$
—

 
$
3

 
$
2,252

 
$
—

 
$
1,119

Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet Date
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
(7
)
 
$
—

 
$
(200
)
(1) 
Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. Refer to Note 5 c) for additional information.
 
Assets
 
 
Liabilities

 
Available-for-Sale Debt Securities
 
 
Equity
securities

 
Other
investments

 
Other
derivative
instruments

 
GLB(1)

Year Ended December 31, 2011
U.S.
Treasury
and
Agency

 
Foreign

 
Corporate
securities

 
MBS

 
States,
municipalities,
and political
subdivisions

 
(in millions of U.S. dollars)
 
 
 
 
 
 
 
 
Balance-Beginning of year
$
—

 
$
26

 
$
115

 
$
39

 
$
2

 
$
13

 
$
1,432

 
$
4

 
$
507

Transfers into Level 3
—

 
9

 
42

 
4

 
—

 
—

 
—

 
—

 
—

Transfers out of Level 3
—

 
(18
)
 
(4
)
 
(48
)
 
—

 
—

 
—

 
—

 
—

Change in Net Unrealized Gains (Losses) included in OCI
—

 
(1
)
 
(2
)
 
—

 
—

 
(1
)
 
93

 
—

 
—

Net Realized Gains/Losses
—

 
—

 
(3
)
 
—

 
—

 
4

 
(3
)
 
2

 
812

Purchases
5

 
23

 
32

 
59

 
—

 
5

 
602

 
—

 
—

Sales
—

 
(3
)
 
(27
)
 
(17
)
 
—

 
(8
)
 
(55
)
 
—

 
—

Settlements
—

 
(3
)
 
(19
)
 
(9
)
 
(1
)
 
—

 
(192
)
 
(3
)
 
—

Balance-End of Year
$
5

 
$
33

 
$
134

 
$
28

 
$
1

 
$
13

 
$
1,877

 
$
3

 
$
1,319

Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet Date
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
(3
)
 
$
(1
)
 
$
812

(1) 
Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. The liability for GLB reinsurance was $1.5 billion at December 31, 2011 and $648 million at December 31, 2010, which includes a fair value derivative adjustment of $1.3 billion and $507 million, respectively. 

 
Assets
 
 
Liabilities

 
Available-for-Sale Debt Securities
 
 
 
 
 
 
 
 
GLB(1)

Year Ended December 31, 2010
Foreign

 
Corporate
securities

 
MBS

 
States,
municipalities,
and political
subdivisions

 
Equity
securities

Other
investments

Other
derivative
instruments

(in millions of U.S. dollars)
 
 
 
 
 
 
 
Balance-Beginning of year
$
59

 
$
168

 
$
21

 
$
3

 
$
12

 
$
1,149

 
$
14

 
$
443

Transfers into (Out of) Level 3
(14
)
 
(25
)
 
(1
)
 
—

 
1

 
—

 
—

 
—

Change in Net Unrealized Gains (Losses) included in OCI
1

 
9

 
—

 
—

 
—

 
53

 
—

 
—

Net Realized Gains/Losses
1

 
(3
)
 
—

 
—

 
1

 
(7
)
 
2

 
64

Purchases, Sales, Issuances, and Settlements, Net
(21
)
 
(34
)
 
19

 
(1
)
 
(1
)
 
237

 
(12
)
 
—

Balance-End of Year
$
26

 
$
115

 
$
39

 
$
2

 
$
13

 
$
1,432

 
$
4

 
$
507

Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet Date
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
(7
)
 
$
1

 
$
64

(1) 
Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. The liability for GLB reinsurance was $648 million at December 31, 2010 and $559 million at December 31, 2009, which includes a fair value derivative adjustment of $507 million and $443 million, respectively. 
Carrying Values And Fair Values Of Financial Instruments Not Measured At Fair Value 
The following table presents carrying values and fair values of financial instruments not measured at fair value:
 
December 31
 
 
December 31
 
 
2012
 
 
2011
 
(in millions of U.S. dollars)
Carrying Value

 
Fair Value

 
Carrying Value

 
Fair Value

Assets:
 
 
 
 
 
 
 
Fixed maturities held to maturity
 
 
 
 
 
 
 
U.S. Treasury and agency
$
1,044

 
$
1,083

 
$
1,078

 
$
1,126

Foreign
910

 
964

 
935

 
930

Corporate securities
2,133

 
2,275

 
2,338

 
2,337

Mortgage-backed securities
2,028

 
2,116

 
2,949

 
3,036

States, municipalities, and political subdivisions
1,155

 
1,195

 
1,147

 
1,176


7,270

 
7,633

 
8,447

 
8,605

Partially-owned insurance companies
454

 
454

 
352

 
352

Total assets
$
7,724

 
$
8,087

 
$
8,799

 
$
8,957

Liabilities:
 
 
 
 
 
 
 
Short-term debt
$
1,401

 
$
1,401

 
$
1,251

 
$
1,251

Long-term debt
3,360

 
3,916

 
3,360

 
3,823

Trust preferred securities
309

 
446

 
309

 
404

Total liabilities
$
5,070

 
$
5,763

 
$
4,920

 
$
5,478

Financial Instruments Not Carried At Fair Value 
The following table presents, by valuation hierarchy, the financial instruments not measured at fair value: 
 
December 31, 2012
 
(in millions of U.S. dollars)
Level 1

 
Level 2

 
Level 3

 
Total

Assets:
 
 
 
 
 
 
 
Fixed maturities held to maturity
 
 
 
 
 
 
 
U.S. Treasury and agency
$
619

 
$
464

 
$
—

 
$
1,083

Foreign
—

 
964

 
—

 
964

Corporate securities
—

 
2,257

 
18

 
2,275

Mortgage-backed securities
—

 
2,116

 
—

 
2,116

States, municipalities, and political subdivisions
—

 
1,195

 
—

 
1,195

 
619

 
6,996

 
18

 
7,633

Partially-owned insurance companies
—

 
—

 
454

 
454

Total assets
$
619

 
$
6,996

 
$
472

 
$
8,087

Liabilities:
 
 
 
 
 
 
 
Short-term debt
$
—

 
$
1,401

 
$
—

 
$
1,401

Long-term debt
—

 
3,916

 
—

 
3,916

Trust preferred securities
—

 
446

 
—

 
446

Total liabilities
$
—

 
$
5,763

 
$
—

 
$
5,763

Reinsurance (Tables)
Schedule of direct, assumed and ceded premiums 
The following table presents direct, assumed, and ceded premiums:
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012
 
 
2011
 
 
2010
 
Premiums written
 
 
 
 
 
 
Direct
$
18,144

 
$
17,626

 
$
15,887

Assumed
 
3,449

 
 
3,205

 
 
3,624

Ceded
 
(5,518
)
 
 
(5,459
)
 
 
(5,803
)
Net
$
16,075

 
$
15,372

 
$
13,708

Premiums earned
 
 
 
 

 
 

Direct
$
17,802

 
$
17,534

 
$
15,780

Assumed
 
3,302

 
 
3,349

 
 
3,516

Ceded
 
(5,427
)
 
 
(5,496
)
 
 
(5,792
)
Net
$
15,677

 
$
15,387

 
$
13,504

Schedule of reinsurance recoverable on losses and loss expenses 
The following table presents the composition of reinsurance recoverable on losses and loss expenses:
 
 
December 31
 
 
December 31
 
(in millions of U.S. dollars)
2012
 
 
2011
 
Reinsurance recoverable on unpaid losses and loss expenses (1)

$
11,399

 

$
11,602

Reinsurance recoverable on paid losses and loss expenses (1)
 
679

 
 
787

Net reinsurance recoverable on losses and loss expenses

$
12,078

 

$
12,389

Schedule of reinsurance recoverable and provision by category of reinsurer 

(in millions of U.S. dollars, except percentages)
2012
 
 
Provision
 
 
% of Gross

Categories
 
Largest reinsurers

$
5,800

 

$
98

 
1.7
%
Other reinsurers balances rated A- or better
 
3,080

 
 
40

 
1.3
%
Other reinsurers balances with ratings lower than A- or not rated
 
602

 
 
120

 
19.9
%
Other pools and government agencies
 
383

 
 
14

 
3.7
%
Structured settlements
 
582

 
 
24

 
4.1
%
Captives
 
1,761

 
 
14

 
0.8
%
Other
 
309

 
 
129

 
41.7
%
Total

$
12,517

 

$
439

 
3.5
%
Schedule of income and expenses relating to GMDB and GLB reinsurance 
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

GMDB
 
 
 
 
 
Net premiums earned
$
85

 
$
98

 
$
109

Policy benefits and other reserve adjustments
$
60

 
$
59

 
$
99

GLB
 
 
 
 
 
Net premiums earned
$
160

 
$
163

 
$
164

Policy benefits and other reserve adjustments
61

 
47

 
29

Net realized gains (losses)
203

 
(812
)
 
(64
)
Gain (loss) recognized in income
$
302

 
$
(696
)
 
$
71

Net cash received
$
149

 
$
161

 
$
160

Net (increase) decrease in liability
$
153

 
$
(857
)
 
$
(89
)
Intangible Assets (Tables)
Goodwill roll-forward by business segment 
The following table presents a roll-forward of Goodwill by business segment:
(in millions of U.S. dollars)
Insurance – North American

 
Insurance – Overseas General

 
Global Reinsurance

 
Life

 
ACE Consolidated

Balance at December 31, 2010
$
1,351

 
$
1,564

 
$
365

 
$
750

 
$
4,030

Purchase price allocation adjustment
(12
)
 
5

 
—

 
—

 
(7
)
Acquisition of New York Life's Korea operations and Hong Kong operations
—

 
—

 
—

 
89

 
89

Acquisition of PMHC
11

 
—

 
—

 
—

 
11

Acquisition of Rio Guayas
—

 
31

 
—

 
—

 
31

Foreign exchange revaluation and other
—

 
3

 
—

 
(9
)
 
(6
)
Balance at December 31, 2011
$
1,350

 
$
1,603

 
$
365

 
$
830

 
$
4,148

Purchase price allocation adjustment
—

 
—

 
—

 
4

 
4

Acquisition of JaPro
—

 
123

 
—

 
—

 
123

Foreign exchange revaluation and other
3

 
38

 
—

 
3

 
44

Balance at December 31, 2012
$
1,353


$
1,764

 
$
365

 
$
837

 
$
4,319

Schedule of VOBA roll-foward 
The following table presents a roll-forward of VOBA:
(in millions of U.S. dollars)
2012

 
2011

 
2010

Balance, beginning of year
$
676

 
$
634

 
$
748

Acquisition of New York Life's Korea operations and Hong Kong operations
—

 
151

 
—

Amortization expense
(82
)
 
(108
)
 
(111
)
Foreign exchange revaluation
20

 
(1
)
 
(3
)
Balance, end of year
$
614

 
$
676

 
$
634

Schedule of estimated amortization expense related to VOBA 
The following table presents the estimated amortization expense related to other intangible assets and VOBA for the next five years:
For the Year Ending December 31
Other intangible assets

 
VOBA

(in millions of U.S. dollars)
 
2013
$
49

 
$
67

2014
45

 
58

2015
40

 
51

2016
35

 
45

2017
33

 
42

Total
$
202

 
$
263

Unpaid losses and loss expenses (Tables)
Schedule Of Unpaid Losses And Loss Expenses Roll Forward 
The following table presents a reconciliation of unpaid losses and loss expenses:

 
Years Ended December 31
 
(in millions of U.S. dollars)
2012
 
 
2011
 
 
2010
 
Gross unpaid losses and loss expenses, beginning of year
 
$
37,477

 

$
37,391

 

$
37,783

Reinsurance recoverable on unpaid losses(1)
 
(11,602
)
 
 
(12,149
)
 
 
(12,745
)
Net unpaid losses and loss expenses, beginning of year
 
25,875

 
 
25,242

 
 
25,038

Acquisition of subsidiaries
 
14

 
 
92

 
 
145

Total
 
25,889

 
 
25,334

 
 
25,183

Net losses and loss expenses incurred in respect of losses occurring in:
 
 
 
 
 
 
 
 
Current year
 
10,132

 
 
10,076

 
 
8,082

Prior years
 
(479
)
 
 
(556
)
 
 
(503
)
Total
 
9,653

 
 
9,520

 
 
7,579

Net losses and loss expenses paid in respect of losses occurring in:
 
 
 
 
 
 
 
 
Current year
 
4,325

 
 
4,209

 
 
2,689

Prior years
 
4,894

 
 
4,657

 
 
4,724

Total
 
9,219

 
 
8,866

 
 
7,413

Foreign currency revaluation and other
 
224

 
 
(113
)
 
 
(107
)
Net unpaid losses and loss expenses, end of year
 
26,547

 
 
25,875

 
 
25,242

Reinsurance recoverable on unpaid losses(1)
 
11,399

 
 
11,602

 
 
12,149

Gross unpaid losses and loss expenses, end of year
 
$
37,946

 
 
$
37,477

 
 
$
37,391

(1) Net of provision for uncollectible reinsurance.
 
 
 
 
 
 
 
 
Schedule Of Asbestos Environmental Loss Roll Forward 

The table below presents a roll-forward of consolidated A&E loss reserves (excluding other run-off liabilities), allocated loss expense reserves for A&E exposures, and the provision for uncollectible paid and unpaid reinsurance recoverables:
 
Asbestos
 
Environmental
 
Total
(in millions of U.S. dollars)
Gross
 
 
Net
 
 
Gross
 
 
Net
 
 
Gross
 
 
Net
 
Balance at December 31, 2011(1)
 
$
2,086

 
 
$
1,142

 
 
$
245

 
 
$
162

 
 
$
2,331

 
 
$
1,304

Incurred activity
 
211

 
 
95

 
 
40

 
 
39

 
 
251

 
 
134

Paid activity
 
(440
)
 
 
(275
)
 
 
(78
)
 
 
(61
)
 
 
(518
)
 
 
(336
)
Balance at December 31, 2012
 
$
1,857

 
 
$
962

 
 
$
207

 
 
$
140

 
 
$
2,064

 
 
$
1,102

(1) 
Balances at December 31, 2011 have been adjusted to present claims in a manner consistent with balances disclosed at December 31, 2012.

Schedule Of Brandywine Asbestos Environmental Loss Roll Forward 

The following table presents a roll-forward of net loss reserves, allocated loss expense reserves, and provision for uncollectible paid and unpaid reinsurance recoverables in respect of Brandywine operations only, including the impact of the Brandywine NICO Agreement for the year ended December 31, 2012:
 
Brandywine
 
NICO Coverage
 
 
Net of NICO Coverage

(in millions of U.S. dollars)
A&E
 
 
Other
 
(1) 
Total
 
 
(2) 
Balance at December 31, 2011(3)
 
$
1,032

 
 
$
458

 
 
$
1,490

 
 
$
386

 
$
1,104

Incurred activity
 
110

 
 
19

 
 
129

 
 
—

 
129

Paid activity
 
(290
)
 
 
(56
)
 
 
(346
)
 
 
(368
)
 
22

Balance at December 31, 2012
 
$
852

 
 
$
421

 
 
$
1,273

 
 
$
18

 
$
1,255

(1) 
Other consists primarily of workers' compensation, non-A&E general liability losses, and provision for uncollectible reinsurance on non-A&E business.
(2) 
NICO Coverage at December 31, 2011 was reduced to reflect $238 million of advances from NICO on uncollected inuring reinsurance recoverables as payments reducing the limit.
(3) 
Balances at December 31, 2011 have been adjusted to present claims in a manner consistent with balances disclosed at December 31, 2012.

Schedule Of Westchester Specialty Asbestos Environmental Loss Roll Forward 

The following table presents a roll-forward of net loss reserves, allocated loss expense reserves, and provision for uncollectible paid and unpaid reinsurance recoverables in respect of 1996 and prior Westchester Specialty operations that are the subject business of the NICO covers for the year ended December 31, 2012:
 
Westchester Specialty
 
NICO Coverage
 
 
Net of NICO Coverage
 
(in millions of U.S. dollars)
A&E
 
 
Other
 
 
Total
 
 
 
Balance at December 31, 2011(1)

$
144

 

$
54

 

$
198

 

$
165

 

$
33

Incurred activity
 
22

 
 
(6
)
 
 
16

 
 
12

 
 
4

Paid activity
 
(15)

 
 
(4)

 
 
(19)

 
 
(19)

 
 
—

Balance at December 31, 2012

$
151

 

$
44

 

$
195

 

$
158

 
 
$
37

(1) 
Balances at December 31, 2011 have been adjusted to present claims in a manner consistent with balances disclosed at December 31, 2012.

Taxation (Tables)
Schedule of components of income tax provision 
The following table presents the provision for income taxes:
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

Current tax expense
$
305

 
$
485

 
$
443

Deferred tax expense (benefit)
(35
)
 
17

 
110

Provision for income taxes
$
270

 
$
502

 
$
553

Reconciliation schedule of the difference between the provision for income taxes and the expected tax provision at the Swiss statutory income tax rate 
The following table presents a reconciliation of the difference between the provision for income taxes and the expected tax provision at the Swiss statutory income tax rate:
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

Expected tax provision at Swiss statutory tax rate
$
233

 
$
160

 
$
285

Permanent differences:
 
 
 
 
 
Taxes on earnings subject to rate other than Swiss statutory rate
129

 
323

 
327

Tax-exempt interest and dividends received deduction, net of proration
(24
)
 
(21
)
 
(20
)
Net withholding taxes
23

 
19

 
15

Favorable resolution of prior years' tax matters and closing statutes of limitations
(124
)
 
—

 
(21
)
Change in valuation allowance
4

 
(2
)
 
(3
)
Non-taxable acquisition gain
—

 
—

 
(61
)
Other
29

 
23

 
31

Total provision for income taxes
$
270

 
$
502

 
$
553

Schedule of the components of net deferred tax assets 
The following table presents the components of the net deferred tax assets:
 
December 31

 
December 31

(in millions of U.S. dollars)
2012

 
2011

Deferred tax assets:
 
 
 
Loss reserve discount
$
849

 
$
933

Unearned premiums reserve
98

 
85

Foreign tax credits
1,131

 
1,074

Investments
43

 
67

Provision for uncollectible balances
110

 
113

Loss carry-forwards
55

 
43

Other, net
110

 
31

Cumulative translation adjustment
—

 
5

Total deferred tax assets
2,396

 
2,351

Deferred tax liabilities:
 
 
 
Deferred policy acquisition costs
68

 
47

VOBA and other intangible assets
379

 
372

Un-remitted foreign earnings
795

 
810

Unrealized appreciation on investments
586

 
392

Cumulative translation adjustment
59

 
—

Total deferred tax liabilities
1,887

 
1,621

Valuation allowance
56

 
57

Net deferred tax assets
$
453

 
$
673

Reconciliation schedule of unrecognized tax benefits 
The following table presents a reconciliation of the beginning and ending amount of unrecognized tax benefits:
 
December 31

 
December 31

(in millions of U.S. dollars)
2012

 
2011

Balance, beginning of year
$
134

 
$
139

Additions based on tax provisions related to the current year
19

 
1

Reductions for tax positions of prior years
—

 
(6
)
Reductions for settlements with tax authorities
(16
)
 
—

Reductions for the lapse of the applicable statutes of limitations
(111
)
 
—

Balance, end of year
$
26

 
$
134

Debt (Tables)
Schedule of debt outstanding
Debt outstanding consisted of the following:
 
December 31

 
December 31

(in millions of U.S. dollars)
2012

 
2011

Short-term debt
 
 
 
Reverse repurchase agreements
$
1,401

 
$
1,251

Long-term debt
 
 
 
ACE INA senior notes due 2014
$
500

 
$
500

ACE INA senior notes due 2015
449

 
449

ACE INA senior notes due 2015
699

 
699

ACE INA senior notes due 2017
500

 
500

ACE INA senior notes due 2018
300

 
300

ACE INA senior notes due 2019
500

 
500

ACE INA debentures due 2029
100

 
100

ACE INA senior notes due 2036
299

 
299

Other
13

 
13

 
$
3,360

 
$
3,360

Trust Preferred Securities
 
 
 
ACE INA capital securities due 2030
$
309

 
$
309

Commitments, contingencies, and guarantees (Tables)
Balance Sheet Locations, Fair Values In An Asset Or (Liability) Position, And Notional Values/Payment Provisions Of Derivative Instruments 
 
 
 
December 31
 
 
December 31
 
 
 
 
 

2012

 
2011
 
(in millions of U.S. dollars)
Consolidated
Balance Sheet
Location
 
Fair Value

 
Notional
Value/
Payment
Provision

 
Fair Value

 
Notional
Value/
Payment
Provision

Investment and embedded derivative instruments
 
 
 
 
 
 
 
 
 
Foreign currency forward contracts
AP
 
$
—

 
$
620

 
$
7

 
$
674

Cross-currency swaps
AP
 
—

 
50

 
—

 
—

Futures contracts on money market instruments
AP
 
1

 
2,710

 
7

 
10,476

Futures contracts on notes and bonds
AP
 
10

 
915

 
(4
)
 
1,055

Options on money market instruments
AP
 
—

 
—

 
—

 
292

Convertible bonds
FM AFS
 
309

 
279

 
357

 
353

TBAs
FM AFS
 
—

 
—

 
60

 
56

 
 
 
$
320

 
$
4,574

 
$
427

 
$
12,906

Other derivative instruments
 
 
 
 
 
 
 
 
 
Futures contracts on equities(1)
AP
 
$
(6
)
 
$
2,308

 
$
(16
)
 
$
1,367

Options on equity market indices(1)
AP
 
30

 
250

 
54

 
250

Credit default swaps
AP
 
—

 
—

 
3

 
350

Other
AP
 
—

 
—

 
—

 
6

 
 
 
$
24

 
$
2,558

 
$
41

 
$
1,973

GLB(2)
AP/FPB
 
$
(1,352
)
 
$
1,100

 
$
(1,505
)
 
$
1,378

(1) 
Related to GMDB and GLB blocks of business.
(2) 
Includes both future policy benefits reserves and fair value derivative adjustment. Refer to Note 5 c) for additional information. Note that the payment provision related to GLB is the net amount at risk. The concept of a notional value does not apply to the GLB reinsurance contracts.
Net Realized Gains (Losses) Of Derivative Instrument Activity In Consolidated Statement Of Operations 
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

Investment and embedded derivative instruments
 
 
 
 
 
Foreign currency forward contracts
$
(9
)
 
$
6

 
$
21

All other futures contracts and options
(22
)
 
(98
)
 
29

Convertible bonds
25

 
(50
)
 
7

TBAs
—

 
(1
)
 
1

Total investment and embedded derivative instruments
$
(6
)
 
$
(143
)
 
$
58

GLB and other derivative instruments
 
 
 
 
 
GLB(1)
$
171

 
$
(779
)
 
$
(28
)
Futures contracts on equities(2)
(273
)
 
(12
)
 
(140
)
Options on equity market indices(2)
(24
)
 
8

 
(10
)
Interest rate swaps
—

 
—

 
(21
)
Credit default swaps
(4
)
 
(4
)
 
1

Other
—

 
—

 
1

Total GLB and other derivative instruments
$
(130
)
 
$
(787
)
 
$
(197
)
 
$
(136
)
 
$
(930
)
 
$
(139
)
(1) 
Excludes foreign exchange gains (losses) related to GLB.
(2) 
Related to GMDB and GLB blocks of business. 
Schedule of Future Minimum Rental Payments for Operating Leases 
Future minimum lease payments under the leases are expected to be as follows:
For the year ending December 31
(in millions of U.S. dollars)
2013
$
91

2014
79

2015
69

2016
60

2017
51

Thereafter
151

Total minimum future lease commitments
$
501

Shareholders' equity (Tables)
Schedule of changes in Common Shares issued and outstanding
The following table presents a roll-forward of changes in Common Shares issued and outstanding:
 
Years Ended December 31
 
 
2012

2011

2010

Shares issued, beginning of year
342,832,412

341,094,559

337,841,616

Shares issued, net
—

—

2,268,000

Exercise of stock options
—

1,737,853

984,943

Shares issued, end of year
342,832,412

342,832,412

341,094,559

Common Shares in treasury, end of year
(2,510,878
)
(5,905,136
)
(6,151,707
)
Shares issued and outstanding, end of year
340,321,534

336,927,276

334,942,852

Common Shares issued to employee trust
 
 
 
Balance, beginning of year
(9,467
)
(101,481
)
(101,481
)
Shares redeemed
—

92,014

—

Balance, end of year
(9,467
)
(9,467
)
(101,481
)
Share-based compensation (Tables)
Schedule of pre-tax and after-tax share-based compensation expense 
The following table presents pre-tax and after-tax share-based compensation expense:
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

Stock options and shares issued under ESPP:
 
 
 
 
 
Pre-tax
$
22

 
$
23

 
$
28

After-tax (1)
$
17

 
$
17

 
$
20

Restricted stock:
 
 
 
 
 
Pre-tax
$
109

 
$
108

 
$
111

After-tax
$
64

 
$
70

 
$
79

 
 
 
 
 
 
Schedule of the weighted-average model valuation assumptions 
The following table presents the weighted-average model assumptions used for grants:
 
Years Ended December 31
 
 
2012

2011

2010

Dividend yield
2.7
%
2.2
%
2.5
%
Expected volatility
29.8
%
28.8
%
30.3
%
Risk-free interest rate
1.1
%
2.3
%
2.5
%
Forfeiture rate
6.5
%
6.5
%
7.5
%
Expected life
5.8 years

5.4 years

5.4 years

Rollforward of the company's stock options 
The following table presents a roll-forward of ACE's stock options:
(Intrinsic Value in millions of U.S. dollars)
Number of Options

 
Weighted-Average Exercise Price

 
Weighted-Average Fair Value

 
Total Intrinsic Value

Options outstanding, December 31, 2009
11,483,104

 
$
45.46

 
 
 
 
Granted
2,094,227

 
$
50.38

 
$
12.09

 
 
Exercised
(1,328,715
)
 
$
40.11

 
 
 
$
22

Forfeited
(305,723
)
 
$
49.77

 
 
 
 
Options outstanding, December 31, 2010
11,942,893

 
$
46.80

 
 
 
 
Granted
1,649,824

 
$
62.68

 
$
14.67

 
 
Exercised
(2,741,238
)
 
$
44.45

 
 
 
$
63

Forfeited
(271,972
)
 
$
51.33

 
 
 
 
Options outstanding, December 31, 2011
10,579,507

 
$
49.78

 
 
 
 
Granted
1,462,103

 
$
73.36

 
$
15.58

 
 
Exercised
(2,401,869
)
 
$
42.50

 
 
 
$
78

Forfeited
(190,082
)
 
$
61.87

 
 
 
 
Options outstanding, December 31, 2012
9,449,659

 
$
55.03

 
 
 
$
234

Options exercisable, December 31, 2012
6,446,407

 
$
50.26

 
 
 
$
190

Rollforward of the company's restricted stock 
The following table presents a roll-forward of our restricted stock awards. Included in the roll-forward below are 25,669 restricted stock awards, 32,660 restricted stock awards, and 36,248 restricted stock awards that were granted to non-management directors during the years ended December 31, 2012, 2011, and 2010 respectively:
 
Number of Restricted Stock

 
Weighted-Average Grant-Date Fair Value

Unvested restricted stock, December 31, 2009
4,873,429

 
$
48.25

Granted
2,461,076

 
$
51.09

Vested
(1,771,423
)
 
$
50.79

Forfeited
(257,350
)
 
$
47.93

Unvested restricted stock, December 31, 2010
5,305,732

 
$
48.74

Granted
1,808,745

 
$
60.01

Vested
(1,929,189
)
 
$
50.82

Forfeited
(333,798
)
 
$
47.46

Unvested restricted stock, December 31, 2011
4,851,490

 
$
52.20

Granted
1,589,178

 
$
73.46

Vested
(1,923,385
)
 
$
52.71

Forfeited
(262,436
)
 
$
58.40

Unvested restricted stock, December 31, 2012
4,254,847

 
$
59.53

Pension plans (Tables)
Schedule of expected future benefit payments
Expected future payments are as follows:

For the year ending December 31
(in millions of U.S dollars)
2013
$
21

2014
21

2015
23

2016
24

2017
22

2018-2022
127

Other (income) expense (Tables)
Schedule of the components of Other (income) expense
The following table presents the components of Other (income) expense as reflected in the consolidated statements of operations:
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

Equity in net (income) loss of partially-owned entities
$
(80
)
 
$
(32
)
 
$
(75
)
Amortization of intangible assets
51

 
29

 
9

(Gains) losses from fair value changes in separate account assets
(29
)
 
36

 
—

Federal excise and capital taxes
22

 
20

 
19

Acquisition-related costs
11

 
5

 
14

Other
19

 
23

 
23

Other (income) expense
$
(6
)
 
$
81

 
$
(10
)
Segment information (Tables)
12 Months Ended
Dec. 31, 2012
Segment Reporting [Abstract]
 
Operations By Segment
Text Block 
Net Premiums Earned For Segment By Product
Text Block 
Net Premiums Earned by Geographic Region
Years Ended 
Operations By Segment 
Statement of Operations by Segment
For the Year Ended December 31, 2012 (in millions of U.S. dollars)
Insurance –
North
American

 
Insurance –
Overseas
General

 
Global
Reinsurance

 
Life

 
Corporate
and Other

 
ACE
Consolidated

Net premiums written
$
7,208

 
$
5,863

 
$
1,025

 
$
1,979

 
$
—

 
$
16,075

Net premiums earned
7,019

 
5,740

 
1,002

 
1,916

 
—

 
15,677

Losses and loss expenses
5,626

 
2,862

 
553

 
611

 
1

 
9,653

Policy benefits
—

 
—

 
—

 
521

 
—

 
521

Policy acquisition costs
586

 
1,353

 
172

 
334

 
1

 
2,446

Administrative expenses
601

 
935

 
51

 
328

 
181

 
2,096

Underwriting income (loss)
206

 
590

 
226

 
122

 
(183
)
 
961

Net investment income
1,091

 
521

 
290

 
251

 
28

 
2,181

Net realized gains (losses) including OTTI
42

 
103

 
6

 
(72
)
 
(1
)
 
78

Interest expense
12

 
5

 
4

 
12

 
217

 
250

Other (income) expense:
 
 
 
 
 
 
 
 
 
 
 
(Gains) losses from fair value changes in separate account assets
—

 
—

 
—

 
(29
)
 
—

 
(29
)
Other
(9
)
 
3

 
(15
)
 
25

 
19

 
23

Income tax expense (benefit)
200

 
133

 
15

 
58

 
(136
)
 
270

Net income (loss)
$
1,136

 
$
1,073

 
$
518

 
$
235

 
$
(256
)
 
$
2,706



 
Statement of Operations by Segment
For the Year Ended December 31, 2011
(in millions of U.S. dollars)
Insurance –
North
American

 
Insurance –
Overseas
General

 
Global
Reinsurance

 
Life

 
Corporate
and Other

 
ACE
Consolidated

Net premiums written
$
6,851

 
$
5,629

 
$
979

 
$
1,913

 
$
—

 
$
15,372

Net premiums earned
6,911

 
5,614

 
1,003

 
1,859

 
—

 
15,387

Losses and loss expenses
5,276

 
3,029

 
621

 
593

 
1

 
9,520

Policy benefits
—

 
—

 
—

 
401

 
—

 
401

Policy acquisition costs
612

 
1,335

 
185

 
339

 
1

 
2,472

Administrative expenses
592

 
939

 
52

 
317

 
168

 
2,068

Underwriting income (loss)
431

 
311

 
145

 
209

 
(170
)
 
926

Net investment income
1,170

 
546

 
287

 
226

 
13

 
2,242

Net realized gains (losses) including OTTI
34

 
33

 
(50
)
 
(806
)
 
(6
)
 
(795
)
Interest expense
15

 
5

 
2

 
11

 
217

 
250

Other (income) expense
 
 
 
 
 
 
 
 
 
 
 
(Gains) losses from fair value changes in separate account assets
—

 
—

 
—

 
36

 
—

 
36

Other
5

 
—

 
(1
)
 
26

 
15

 
45

Income tax expense (benefit)
395

 
164

 
30

 
50

 
(137
)
 
502

Net income (loss)
$
1,220

 
$
721

 
$
351

 
$
(494
)
 
$
(258
)
 
$
1,540


Statement of Operations by Segment
For the Year Ended December 31, 2010
(in millions of U.S. dollars)
Insurance –
North
American

 
Insurance –
Overseas
General

 
Global
Reinsurance

 
Life

 
Corporate
and Other

 
ACE
Consolidated

Net premiums written
$
5,797

 
$
5,189

 
$
1,075

 
$
1,647

 
$
—

 
$
13,708

Net premiums earned
5,651

 
5,153

 
1,071

 
1,629

 
—

 
13,504

Losses and loss expenses
3,918

 
2,615

 
518

 
528

 
—

 
7,579

Policy benefits
—

 
—

 
—

 
357

 
—

 
357

Policy acquisition costs
626

 
1,209

 
204

 
306

 
—

 
2,345

Administrative expenses
561

 
837

 
55

 
246

 
174

 
1,873

Underwriting income (loss)
546

 
492

 
294

 
192

 
(174
)
 
1,350

Net investment income
1,138

 
473

 
288

 
174

 
(3
)
 
2,070

Net realized gains (losses) including OTTI
417

 
123

 
93

 
(192
)
 
(9
)
 
432

Interest expense
9

 
1

 
—

 
3

 
211

 
224

Other (income) expense
(22
)
 
(13
)
 
(23
)
 
26

 
22

 
(10
)
Income tax expense (benefit)
435

 
171

 
42

 
59

 
(154)

 
553

Net income (loss)
$
1,679

 
$
929

 
$
656

 
$
86

 
$
(265
)
 
$
3,085

Net Premiums Earned For Segment By Product 
(in millions of U.S. dollars)
Property &
All Other

 
Casualty

 
Life,
Accident &
Health

 
ACE
Consolidated

For the Year Ended December 31, 2012
 
 
 
 
 
 
 
Insurance – North American
$
3,242

 
$
3,406

 
$
371

 
$
7,019

Insurance – Overseas General
2,236

 
1,379

 
2,125

 
5,740

Global Reinsurance
495

 
507

 
—

 
1,002

Life
—

 
—

 
1,916

 
1,916

 
$
5,973

 
$
5,292

 
$
4,412

 
$
15,677

For the Year Ended December 31, 2011
 
 
 
 
 
 
 
Insurance – North American
$
3,174

 
$
3,380

 
$
357

 
$
6,911

Insurance – Overseas General
2,080

 
1,415

 
2,119

 
5,614

Global Reinsurance
458

 
545

 
—

 
1,003

Life
—

 
—

 
1,859

 
1,859

 
$
5,712

 
$
5,340

 
$
4,335

 
$
15,387

For the Year Ended December 31, 2010
 
 
 
 
 
 
 
Insurance – North American
$
1,578

 
$
3,777

 
$
296

 
$
5,651

Insurance – Overseas General
1,800

 
1,424

 
1,929

 
5,153

Global Reinsurance
520

 
551

 
—

 
1,071

Life
—

 
—

 
1,629

 
1,629

 
$
3,898

 
$
5,752

 
$
3,854

 
$
13,504

Earnings per share (Tables)
Schedule Of Earnings Per Share, Basic And Diluted
 
Years Ended December 31
 
 (in millions of U.S. dollars, except share and per share data)
2012

 
2011

 
2010

Numerator:
 
 
 
 
 
Net income
$
2,706

 
$
1,540

 
$
3,085

Denominator:
 
 
 
 
 
Denominator for basic earnings per share:
 
 
 
 
 
Weighted-average shares outstanding
339,843,438

 
338,159,409

 
339,685,143

Denominator for diluted earnings per share:
 
 
 
 
 
Share-based compensation plans
2,903,512

 
2,620,815

 
1,561,244

Adjusted weighted-average shares outstanding and assumed conversions
342,746,950

 
340,780,224

 
341,246,387

Basic earnings per share
$
7.96

 
$
4.55

 
$
9.08

Diluted earnings per share
$
7.89

 
$
4.52

 
$
9.04

Potential anti-dilutive share conversions
896,591

 
111,326

 
256,868

Statutory Financial Information (Tables)
Schedule of combined statutory capital and surplus and statutory net income (loss)
The following tables present the combined statutory capital and surplus and statutory net income of the U.S. and International subsidiaries:
 
 
 
 
 
December 31

(in millions of U.S. dollars)
 
 
2012

 
2011

Statutory capital and surplus
 
 
 
 
 
U.S. Subsidiaries
 
 
$
6,037

 
$
5,858

International Subsidiaries
 
 
$
18,317

 
$
15,565

 
 
 
 
 
 
 
Years Ended December 31
 
(in millions of U.S. dollars)
2012

 
2011

 
2010

Statutory net income
 
 
 
 
 
U.S. Subsidiaries
$
619

 
$
702

 
$
1,025

International Subsidiaries
$
2,118

 
$
1,214

 
$
2,592

Information provided in connection with outstanding debt of subsidiaries (Tables)
Condensed Consolidating Balance Sheet 
.

Condensed Consolidating Balance Sheet at December 31, 2012

(in millions of U.S. dollars)
ACE Limited
(Parent
Guarantor)

 
ACE INA
Holdings Inc.
(Subsidiary
Issuer)

 
Other ACE
Limited
Subsidiaries and
Eliminations(1)

 
Consolidating
Adjustments(2)

 
ACE Limited
Consolidated

Assets
 
 
 
 
 
 
 
 
 
Investments
$
31

 
$
31,074

 
$
29,159

 
$
—

 
$
60,264

Cash(3)
103

 
515

 
(3
)
 
—

 
615

Insurance and reinsurance balances receivable
—

 
3,654

 
493

 
—

 
4,147

Reinsurance recoverable on losses and loss expenses
—

 
17,232

 
(5,154
)
 
—

 
12,078

Reinsurance recoverable on policy benefits
—

 
1,187

 
(946
)
 
—

 
241

Value of business acquired
—

 
610

 
4

 
—

 
614

Goodwill and other intangible assets
—

 
4,419

 
556

 
—

 
4,975

Investments in subsidiaries
27,251

 
—

 
—

 
(27,251
)
 
—

Due from subsidiaries and affiliates, net
204

 
—

 
—

 
(204
)
 
—

Other assets
13

 
7,563

 
2,035

 
—

 
9,611

Total assets
$
27,602

 
$
66,254

 
$
26,144

 
$
(27,455
)
 
$
92,545

Liabilities
 
 
 
 
 
 
 
 
 
Unpaid losses and loss expenses
$
—

 
$
31,356

 
$
6,590

 
$
—

 
$
37,946

Unearned premiums
—

 
5,872

 
992

 
—

 
6,864

Future policy benefits
—

 
3,876

 
594

 
—

 
4,470

Due to (from) subsidiaries and affiliates, net
—

 
384

 
(180
)
 
(204
)
 
—

Short-term debt
—

 
851

 
550

 
—

 
1,401

Long-term debt
—

 
3,360

 
—

 
—

 
3,360

Trust preferred securities
—

 
309

 
—

 
—

 
309

Other liabilities
71

 
8,272

 
2,321

 
—

 
10,664

Total liabilities
71

 
54,280

 
10,867

 
(204
)
 
65,014

Total shareholders’ equity
27,531

 
11,974

 
15,277

 
(27,251
)
 
27,531

Total liabilities and shareholders’ equity
$
27,602

 
$
66,254

 
$
26,144

 
$
(27,455
)
 
$
92,545

(1) 
Includes all other subsidiaries of ACE Limited and intercompany eliminations.
(2) 
Includes ACE Limited parent company eliminations.
(3) 
ACE maintains two notional multi-currency cash pools (Pools) with a third-party bank. Refer to Note 1f) for additional information. At December 31, 2012, the cash balance of one or more entities was negative; however, the overall Pool balances were positive.
Condensed Consolidating Balance Sheet at December 31, 2011

(in millions of U.S. dollars)
ACE Limited
(Parent
Guarantor)

 
ACE INA
Holdings Inc.
(Subsidiary
Issuer)

 
Other ACE
Limited
Subsidiaries and
Eliminations(1)

 
Consolidating
Adjustments(2)

 
ACE Limited
Consolidated

Assets
 
 
 
 
 
 
 
 
 
Investments
$
33

 
$
28,848

 
$
26,795

 
$
—

 
$
55,676

Cash
106

 
382

 
126

 
—

 
614

Insurance and reinsurance balances receivable
—

 
3,944

 
443

 
—

 
4,387

Reinsurance recoverable on losses and loss expenses
—

 
17,146

 
(4,757
)
 
—

 
12,389

Reinsurance recoverable on policy benefits
—

 
941

 
(692
)
 
—

 
249

Value of business acquired
—

 
676

 
—

 
—

 
676

Goodwill and other intangible assets
—

 
4,248

 
551

 
—

 
4,799

Investments in subsidiaries
23,871

 
—

 
—

 
(23,871
)
 
—

Due from subsidiaries and affiliates, net
498

 
—

 
—

 
(498
)
 
—

Other assets
8

 
7,018

 
1,505

 
—

 
8,531

Total assets
$
24,516

 
$
63,203

 
$
23,971

 
$
(24,369
)
 
$
87,321

Liabilities
 
 
 
 
 
 
 
 
 
Unpaid losses and loss expenses
$
—

 
$
30,837

 
$
6,640

 
$
—

 
$
37,477

Unearned premiums
—

 
5,416

 
918

 
—

 
6,334

Future policy benefits
—

 
3,673

 
601

 
—

 
4,274

Due to subsidiaries and affiliates, net
—

 
316

 
182

 
(498
)
 
—

Short-term debt
—

 
850

 
401

 
—

 
1,251

Long-term debt
—

 
3,360

 
—

 
—

 
3,360

Trust preferred securities
—

 
309

 
—

 
—

 
309

Other liabilities
184

 
7,769

 
2,031

 
—

 
9,984

Total liabilities
184

 
52,530

 
10,773

 
(498
)
 
62,989

Total shareholders’ equity
24,332

 
10,673

 
13,198

 
(23,871
)
 
24,332

Total liabilities and shareholders’ equity
$
24,516

 
$
63,203

 
$
23,971

 
$
(24,369
)
 
$
87,321

(1) 
Includes all other subsidiaries of ACE Limited and intercompany eliminations.
(2) 
Includes ACE Limited parent company eliminations.
Condensed Consolidating Statement Of Operations and Comprehensive Income 
Condensed Consolidating Statements of Operations and Comprehensive Income

For the Year Ended December 31, 2012
ACE Limited
(Parent
Guarantor)

 
ACE INA
Holdings Inc.
(Subsidiary
Issuer)

 
Other ACE
Limited
Subsidiaries and
Eliminations(1)

 
Consolidating
Adjustments (2)

 
ACE Limited
Consolidated

(in millions of U.S. dollars)
 
 
 
 
Net premiums written
$
—

 
$
9,466

 
$
6,609

 
$
—

 
$
16,075

Net premiums earned
—

 
9,194

 
6,483

 
—

 
15,677

Net investment income
1

 
1,048

 
1,132

 
—

 
2,181

Equity in earnings of subsidiaries
2,590

 
—

 
—

 
(2,590
)
 
—

Net realized gains (losses) including OTTI
17

 
121

 
(60
)
 
—

 
78

Losses and loss expenses
—

 
6,211

 
3,442

 
—

 
9,653

Policy benefits
—

 
309

 
212

 
—

 
521

Policy acquisition costs and administrative expenses
62

 
2,564

 
1,916

 
—

 
4,542

Interest (income) expense
(33
)
 
257

 
26

 
—

 
250

Other (income) expense
(137
)
 
77

 
54

 
—

 
(6
)
Income tax expense
10

 
193

 
67

 
—

 
270

Net income
$
2,706

 
$
752

 
$
1,838

 
$
(2,590
)
 
$
2,706

Comprehensive income
$
3,682

 
$
1,209

 
$
1,381

 
$
(2,590
)
 
$
3,682



Condensed Consolidating Statements of Operations and Comprehensive Income

For the Year Ended December 31, 2011
ACE Limited
(Parent
Guarantor)

 
ACE INA
Holdings Inc.
(Subsidiary
Issuer)

 
Other ACE
Limited
Subsidiaries and
Eliminations(1)

 
Consolidating
Adjustments (2)

 
ACE Limited
Consolidated

(in millions of U.S. dollars)
 
 
 
 
Net premiums written
$
—

 
$
9,081

 
$
6,291

 
$
—

 
$
15,372

Net premiums earned
—

 
9,082

 
6,305

 
—

 
15,387

Net investment income
2

 
1,096

 
1,144

 
—

 
2,242

Equity in earnings of subsidiaries
1,459

 
—

 
—

 
(1,459
)
 
—

Net realized gains (losses) including OTTI
(4
)
 
62

 
(853
)
 
—

 
(795
)
Losses and loss expenses
—

 
5,889

 
3,631

 
—

 
9,520

Policy benefits
—

 
192

 
209

 
—

 
401

Policy acquisition costs and administrative expenses
69

 
2,561

 
1,910

 
—

 
4,540

Interest (income) expense
(37
)
 
267

 
20

 
—

 
250

Other (income) expense
(125
)
 
143

 
63

 
—

 
81

Income tax expense
10

 
418

 
74

 
—

 
502

Net income
$
1,540

 
$
770

 
$
689

 
$
(1,459
)
 
$
1,540

Comprehensive income
$
1,857

 
$
1,077

 
$
382

 
$
(1,459
)
 
$
1,857

(1) 
Includes all other subsidiaries of ACE Limited and intercompany eliminations.
(2) 
Includes ACE Limited parent company eliminations.

Condensed Consolidating Statements of Operations and Comprehensive Income

For the Year Ended December 31, 2010
ACE Limited
(Parent
Guarantor)

 
ACE INA
Holdings Inc.
(Subsidiary
Issuer)

 
Other ACE
Limited
Subsidiaries and
Eliminations(1)

 
Consolidating
Adjustments (2)

 
ACE Limited
Consolidated

(in millions of U.S. dollars)
 
 
 
 
Net premiums written
$
—

 
$
8,195

 
$
5,513

 
$
—

 
$
13,708

Net premiums earned
—

 
7,940

 
5,564

 
—

 
13,504

Net investment income
1

 
1,011

 
1,058

 
—

 
2,070

Equity in earnings of subsidiaries
3,043

 
—

 
—

 
(3,043
)
 
—

Net realized gains (losses) including OTTI
(42
)
 
303

 
171

 
—

 
432

Losses and loss expenses
—

 
4,910

 
2,669

 
—

 
7,579

Policy benefits
—

 
148

 
209

 
—

 
357

Policy acquisition costs and administrative expenses
70

 
2,395

 
1,753

 
—

 
4,218

Interest (income) expense
(37
)
 
251

 
10

 
—

 
224

Other (income) expense
(123
)
 
101

 
12

 
—

 
(10
)
Income tax expense
7

 
441

 
105

 
—

 
553

Net income
$
3,085

 
$
1,008

 
$
2,035

 
$
(3,043
)
 
$
3,085

Comprehensive income
$
3,856

 
$
1,271

 
$
1,772

 
$
(3,043
)
 
$
3,856

(1) 
Includes all other subsidiaries of ACE Limited and intercompany eliminations.
(2) 
Includes ACE Limited parent company eliminations.
Condensed Consolidating Statement of Cash Flows 
Condensed Consolidating Statement of Cash Flows 

For the Year Ended December 31, 2012
ACE Limited
(Parent
Guarantor)

 
ACE INA
Holdings Inc.
(Subsidiary
Issuer)

 
Other ACE
Limited
Subsidiaries and
Eliminations(1)

 
Consolidating
Adjustments (2)

 
ACE Limited
Consolidated

(in millions of U.S. dollars)
 
 
 
 
Net cash flows from operating activities
$
781

 
$
1,744

 
$
1,920

 
$
(450
)
 
$
3,995

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
Purchases of fixed maturities available for sale
—

 
(11,843
)
 
(12,001
)
 
—

 
(23,844
)
Purchases of fixed maturities held to maturity
—

 
(384
)
 
(4
)
 
—

 
(388
)
Purchases of equity securities
—

 
(70
)
 
(65
)
 
—

 
(135
)
Sales of fixed maturities available for sale
—

 
7,347

 
7,422

 
—

 
14,769

Sales of equity securities
—

 
59

 
60

 
—

 
119

Maturities and redemptions of fixed maturities available for sale
—

 
2,759

 
2,764

 
—

 
5,523

Maturities and redemptions of fixed maturities held to maturity
—

 
1,045

 
406

 
—

 
1,451

Net derivative instruments settlements
(1
)
 
(6
)
 
(274
)
 
—

 
(281
)
Capital contribution
—

 
—

 
(90
)
 
90

 
—

Advances from (to) affiliates
(2
)
 
—

 
—

 
2

 
—

Acquisition of subsidiaries (net of cash acquired of $8)
—

 
(111
)
 
13

 
—

 
(98
)
Other
—

 
(395
)
 
(160
)
 
—

 
(555
)
Net cash flows used for investing activities
(3
)
 
(1,599
)
 
(1,929
)
 
92

 
(3,439
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
Dividends paid on Common Shares
(815
)
 
—

 
—

 
—

 
(815
)
Common Shares repurchased
—

 
—

 
(11
)
 
—

 
(11
)
Net proceeds from issuance of short-term debt
—

 
1

 
149

 
—

 
150

Proceeds from share-based compensation plans, including windfall tax benefits
34

 
13

 
79

 
—

 
126

Advances (to) from affiliates
—

 
(105
)
 
107

 
(2
)
 
—

Dividends to parent company
—

 
—

 
(450
)
 
450

 
—

Capital contribution
—

 
90

 
—

 
(90
)
 
—

Net cash flows used for financing activities
(781
)
 
(1
)
 
(126
)
 
358

 
(550
)
Effect of foreign currency rate changes on cash and cash equivalents
—

 
(11
)
 
6

 
—

 
(5
)
Net increase (decrease) in cash
(3
)
 
133

 
(129
)
 
—

 
1

Cash – beginning of period
106

 
382

 
126

 
—

 
614

Cash – end of period(3)
$
103

 
$
515

 
$
(3
)
 
$
—

 
$
615

(1)
Includes all other subsidiaries of ACE Limited and intercompany eliminations.
(2)
Includes ACE Limited parent company eliminations and certain consolidating adjustments.
(3)
ACE maintains two notional multi-currency cash pools (Pools) with a third-party bank. Refer to Note 1 f) for additional information. At December 31, 2012, the cash balance of one or more entities was negative; however, the overall Pool balances were positive.
Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2011
ACE Limited
(Parent
Guarantor)

 
ACE INA
Holdings Inc.
(Subsidiary
Issuer)

 
Other ACE
Limited
Subsidiaries and
Eliminations(1)

 
Consolidating
Adjustments (2)

 
ACE Limited
Consolidated

(in millions of U.S. dollars)
 
 
 
 
Net cash flows from operating activities
$
762

 
$
1,053

 
$
2,395

 
$
(740
)
 
$
3,470

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
Purchases of fixed maturities available for sale
—

 
(12,203
)
 
(12,375
)
 
—

 
(24,578
)
Purchases of fixed maturities held to maturity
—

 
(338
)
 
(2
)
 
—

 
(340
)
Purchases of equity securities
—

 
(157
)
 
(152
)
 
—

 
(309
)
Sales of fixed maturities available for sale
9

 
9,718

 
8,244

 
—

 
17,971

Sales of equity securities
—

 
354

 
22

 
—

 
376

Maturities and redemptions of fixed maturities available for sale
—

 
1,784

 
1,936

 
—

 
3,720

Maturities and redemptions of fixed maturities held to maturity
—

 
933

 
346

 
—

 
1,279

Net derivative instruments settlements
(3
)
 
(24
)
 
(40
)
 
—

 
(67
)
Capital contribution
(385
)
 
—

 
—

 
385

 
—

Advances from (to) affiliates
41

 
—

 
—

 
(41
)
 
—

Acquisition of subsidiaries (net of cash acquired of $91)
—

 
(569
)
 
(37
)
 
—

 
(606
)
Other
—

 
(420
)
 
(62
)
 
—

 
(482
)
Net cash flows used for investing activities
(338
)
 
(922
)
 
(2,120
)
 
344

 
(3,036
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
Dividends paid on Common Shares
(459
)
 
—

 
—

 
—

 
(459
)
Common Shares repurchased
—

 
—

 
(195
)
 
—

 
(195
)
Net proceeds from (repayments) issuance of short-term debt
(300
)
 
(150
)
 
400

 
—

 
(50
)
Proceeds from share-based compensation plans, including windfall tax benefits
133

 
3

 
3

 
—

 
139

Advances from (to) affiliates
—

 
(149
)
 
108

 
41

 
—

Dividends to parent company
—

 
—

 
(740
)
 
740

 
—

Capital contribution
—

 
—

 
385

 
(385
)
 
—

Net cash flows used for financing activities
(626
)
 
(296
)
 
(39
)
 
396

 
(565
)
Effect of foreign currency rate changes on cash and cash equivalents
—

 
(26
)
 
(1
)
 
—

 
(27
)
Net increase (decrease) in cash
(202
)
 
(191
)
 
235

 
—

 
(158
)
Cash – beginning of period(3)
308

 
573

 
(109
)
 
—

 
772

Cash – end of period
$
106

 
$
382

 
$
126

 
$
—

 
$
614

(1) 
Includes all other subsidiaries of ACE Limited and intercompany eliminations.
(2) 
Includes ACE Limited parent company eliminations and certain consolidating adjustments.
(3) 
ACE maintains two notional multi-currency cash pools (Pools) with a third-party bank. Refer to Note 1 f) for additional information. At December 31, 2010, the cash balance of one or more entities was negative; however, the overall Pool balances were positive.
Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2010
ACE Limited
(Parent
Guarantor)

 
ACE INA
Holdings Inc.
(Subsidiary
Issuer)

 
Other ACE
Limited
Subsidiaries and
Eliminations(1)

 
Consolidating
Adjustments (2)

 
ACE Limited
Consolidated

(in millions of U.S. dollars)
 
 
 
 
Net cash flows from operating activities
$
(176
)
 
$
1,798

 
$
2,124

 
$
(200
)
 
$
3,546

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
Purchases of fixed maturities available for sale
(1
)
 
(13,785
)
 
(17,470
)
 
—

 
(31,256
)
Purchases of fixed maturities held to maturity
—

 
(615
)
 
(1
)
 
—

 
(616
)
Purchases of equity securities
—

 
(107
)
 
(687
)
 
—

 
(794
)
Sales of fixed maturities available for sale
—

 
10,225

 
14,054

 
—

 
24,279

Sales of equity securities
—

 
17

 
757

 
—

 
774

Maturities and redemptions of fixed maturities available for sale
—

 
1,845

 
1,815

 
—

 
3,660

Maturities and redemptions of fixed maturities held to maturity
—

 
1,142

 
211

 
—

 
1,353

Net derivative instruments settlements
(3
)
 
(10
)
 
(96
)
 
—

 
(109
)
Capital contribution
(290
)
 
—

 
—

 
290

 
—

Advances from (to) affiliates
851

 
—

 
—

 
(851
)
 
—

Acquisition of subsidiaries (net of cash acquired of $80)
—

 
(1,139
)
 
—

 
—

 
(1,139
)
Other
—

 
(253
)
 
(80
)
 
—

 
(333
)
Net cash flows from (used for) investing activities
557

 
(2,680
)
 
(1,497
)
 
(561
)
 
(4,181
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
Dividends paid on Common Shares
(435
)
 
—

 
—

 
—

 
(435
)
Common Shares repurchased
—

 
—

 
(235
)
 
—

 
(235
)
Net proceeds from issuance of short-term debt
300

 
841

 
—

 
—

 
1,141

Net proceeds from issuance of long-term debt
—

 
199

 
—

 
—

 
199

Proceeds from share-based compensation plans, including windfall tax benefits
63

 
—

 
(1
)
 
—

 
62

Advances from (to) affiliates
—

 
3

 
(854
)
 
851

 
—

Dividends to parent company
—

 
—

 
(200
)
 
200

 
—

Capital contribution
—

 
—

 
290

 
(290
)
 
—

Net cash flows from (used for) financing activities
(72
)
 
1,043

 
(1,000
)
 
761

 
732

Effect of foreign currency rate changes on cash and cash equivalents
—

 
12

 
(6
)
 
—

 
6

Net increase (decrease) in cash
309

 
173

 
(379
)
 
—

 
103

Cash – beginning of period(3)
(1
)
 
400

 
270

 
—

 
669

Cash – end of period(3)
$
308

 
$
573

 
$
(109
)
 
$
—

 
$
772

(1) 
Includes all other subsidiaries of ACE Limited and intercompany eliminations.
(2) 
Includes ACE Limited parent company eliminations and certain consolidating adjustments.
(3) 
ACE maintains two notional multi-currency cash pools (Pools) with a third-party bank. Refer to Note 1 f) for additional information. At December 31, 2010 and 2009, the cash balance of one or more entities was negative; however, the overall Pool balances were positive.
Condensed Unaudited Quarterly Financial Data (Tables)
Schedule of quarterly financial information
 
Three Months Ended
 
 
March 31

 
June 30

 
September 30

 
December 31

(in millions of U.S. dollars, except per share data)
2012

 
2012

 
2012

 
2012

Net premiums earned
$
3,381

 
$
3,783

 
$
4,665

 
$
3,848

Net investment income
544

 
537

 
533

 
567

Net realized gains (losses) including OTTI
260

 
(394
)
 
(60
)
 
272

Total revenues
$
4,185

 
$
3,926

 
$
5,138

 
$
4,687

Losses and loss expenses
$
1,804

 
$
2,119

 
$
3,047

 
$
2,683

Policy benefits
$
147

 
$
102

 
$
130

 
$
142

Net income
$
973

 
$
328

 
$
640

 
$
765

Basic earnings per share
$
2.87

 
$
0.96

 
$
1.88

 
$
2.24

Diluted earnings per share
$
2.84

 
$
0.96

 
$
1.86

 
$
2.22

 
Three Months Ended
 
 
March 31

 
June 30

 
September 30

 
December 31

(in millions of U.S. dollars, except per share data)
2011

 
2011

 
2011

 
2011

Net premiums earned
$
3,309

 
$
3,757

 
$
4,490

 
$
3,831

Net investment income
544

 
569

 
564

 
565

Net realized gains (losses) including OTTI
(45
)
 
(73
)
 
(760
)
 
83

Total revenues
$
3,808

 
$
4,253

 
$
4,294

 
$
4,479

Losses and loss expenses
$
2,263

 
$
2,226

 
$
2,745

 
$
2,286

Policy benefits
$
91

 
$
108

 
$
83

 
$
119

Net income (loss)
$
250

 
$
594

 
$
(39
)
 
$
735

Basic earnings per share
$
0.74

 
$
1.75

 
$
(0.11
)
 
$
2.17

Diluted earnings per share
$
0.73

 
$
1.74

 
$
(0.11
)
 
$
2.15

Summary of significant accounting policies (Narrative) (Detail) (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Summary of significant accounting policies [Line Items]
 
 
 
Deferred Marketing Costs, Amortization Period
10 years 
 
 
Deferred marketing costs reported in Deferred policy acquisition costs
$ 274 
$ 236 
 
Amortization expense for deferred marketing costs
156 
128 
115 
Recoverable from unrated reinsurers, ceded reserve, default factor (percent)
34.00% 
 
 
Reinsurance business assumed
32 
35 
 
Percentage of fair value of loaned securities
102.00% 
 
 
Maximum overdraft balance guaranteed by ACE Ltd
300 
 
 
Quality assessment threshold used in goodwill impairment testing
50.00% 
 
 
Loss and loss expenses reserves, net of discount
58 
 
 
Gross liability for the amounts due to claimants
640 
 
 
Reinsurance recoverables for amounts due from life insurance companies
582 
 
 
Deposit assets reflected in Other assets
138 
133 
 
Reinsurance deposit liabilities included in Deposit liabilities
283 
318 
 
Contract holder deposit funds included in Deposit liabilities
548 
345 
 
Net operating results of ESIS included within Administrative expenses
23 
21 
85 
Cumulative effect of change in accounting principle
 
45 
23 
New accounting pronouncement effect of change on earnings per share
 
$ 0.13 
$ 0.07 
Deferred Policy Acquisition Costs
 
 
 
Summary of significant accounting policies [Line Items]
 
 
 
Cumulative effect of change in accounting principle
 
213 
 
Retained Earnings
 
 
 
Summary of significant accounting policies [Line Items]
 
 
 
Cumulative effect of change in accounting principle
 
$ 181 
 
Minimum
 
 
 
Summary of significant accounting policies [Line Items]
 
 
 
Amortization period for value of reinsurance business assumed
7 years 
 
 
Finite-lived intangible asset useful life
4 years 
 
 
Interest rates used in calculating reserves
1.00% 
1.00% 
 
Reinsurance Premiums, Amortization Period
1 year 
 
 
Maximum
 
 
 
Summary of significant accounting policies [Line Items]
 
 
 
Amortization period for value of reinsurance business assumed
40 years 
 
 
Finite-lived intangible asset useful life
20 years 
 
 
Interest rates used in calculating reserves
4.50% 
6.00% 
 
Reinsurance Premiums, Amortization Period
3 years 
 
 
Acquisitions (Detail) (USD $)
0 Months Ended
Sep. 18, 2012
PT Asuransi Jaya Proteksi (JaPro)
Sep. 12, 2012
Fianzas Monterrey
Oct. 18, 2012
ABA Seguros
Dec. 31, 2011
New York Life's Korea and Hong Kong
Dec. 28, 2011
Penn Millers Holding Corporation
Dec. 28, 2010
Rain And Hail Insurance Service Inc
Dec. 1, 2010
Rain And Hail And Jerneh
Dec. 28, 2011
Rio Guayas
Sep. 18, 2012
Subsequent Event [Member]
PT Asuransi Jaya Proteksi (JaPro)
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
 
Percentage of business acquired
80.00% 
 
 
 
 
 
 
 
20.00% 
Expected cash consideration for acquisition
$ 107,000,000 
$ 285,000,000 
$ 865,000,000 
$ 450,000,000 
 
 
 
 
 
Acquisition purchase price
 
 
 
 
107,000,000 
1,100,000,000 
218,000,000 
65,000,000 
 
Goodwill generated in acquisitions
 
 
 
91,000,000 
 
123,000,000 
 
 
 
Goodwill expected to be deductible for income tax
 
 
 
0 
 
0 
 
 
 
Other intangible assets generated in acquisition
 
 
 
163,000,000 
 
523,000,000 
 
 
 
Ownership recorded in investments
 
 
 
 
 
20.10% 
 
 
 
Percentage of assets and liabilities acquired.
 
 
 
 
 
100.00% 
 
 
 
Recognized gain in net realized gain (loss)
 
 
 
 
 
175,000,000 
 
 
 
Legal and other expenses incurred to complete acquisition
 
 
 
 
 
2,000,000 
 
 
 
Reverse purchase agreements used to finance acquisitions
 
 
 
 
 
 
$ 1,000,000,000 
 
 
Investments (Narrative) (Detail) (USD $)
12 Months Ended
Dec. 31, 2012
partnerships
Security
Dec. 31, 2011
Dec. 31, 2010
Investments, Debt and Equity Securities [Abstract]
 
 
 
Net unrealized appreciation (depreciation) included in OCI
$ 137,000,000 
$ (48,000,000)
 
Net unrealized depreciation included in AOCI
(25,000,000)
(155,000,000)
 
Percentage of mortgage-backed securities represented by investments in US government agency bonds
85.00% 
84.00% 
 
Portion of gross unrealized loss represented by the United States Treasury and Agency obligations
18,000,000 
 
 
Company assumed recovery rate
32.00% 
 
 
Moodys historical mean recovery rate
42.00% 
 
 
Credit losses recognized in net income for corporate securities
14,000,000 
9,000,000 
14,000,000 
Credit losses recognized in net income for mortgage-backed securities
6,000,000 
11,000,000 
32,000,000 
Limited partnerships number
65 
 
 
Trading securities - mutual funds
212,000,000 
162,000,000 
 
Trading securities - equity securities
23,000,000 
24,000,000 
 
Trading securities - fixed maturities
8,000,000 
8,000,000 
 
Number of fixed maturities in an unrealized loss position
2,029 
 
 
Total number of fixed maturities
23,679 
 
 
Largest single unrealized loss in the fixed maturities
5,000,000 
 
 
Number of equity securities in an unrealized loss position
56 
 
 
Total number of equity securities
193 
 
 
Largest single unrealized loss in the equity securities
1,000,000 
 
 
Restricted assets in fixed maturities and short-term investments
16,600,000,000 
14,900,000,000 
 
Restricted assets in cash
$ 139,000,000 
$ 179,000,000 
 
Investments (Schedule Of Fixed Maturities By Contractual Maturity) (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Investments, Debt and Equity Securities [Abstract]
 
 
Available for sale, Due in 1 year or less, Amortized Cost
$ 1,887 
$ 2,321 
Available for sale, Due after 1 year through 5 years, Amortized Cost
13,411 
12,325 
Available for sale, Due after 5 years though 10 years, Amortized Cost
15,032 
12,379 
Available for sale, Due after 10 years, Amortized Cost
4,285 
3,446 
Available for sale, Subtotal, Amortized Cost
34,615 
30,471 
Available for sale, Mortgage-backed securities, Amortized Cost
10,051 
9,979 
Available for sale, Amortized Cost
44,666 
40,450 
Available for sale, Due in 1 year or less, Fair Value
1,906 
2,349 
Available for sale, Due after 1 year through 5 years, Fair Value
14,010 
12,722 
Available for sale, Due after 5 years through 10 years, Fair Value
16,153 
12,995 
Available for sale, Due after 10 years, Fair Value
4,764 
3,700 
Available for sale, Subtotal, Fair Value
36,833 
31,766 
Available for sale, Mortgage backed securities, Fair Value
10,473 
10,201 
Available for sale, Fair Value
47,306 
41,967 
Held to maturity, Due in 1 year or less, Amortized Cost
656 
393 
Held to maturity, Due after 1 year through 5 years, Amortized Cost
1,870 
2,062 
Held to maturity, Due after 5 years through 10 years, Amortized Cost
2,119 
2,376 
Held to maturity, Due after 10 years, Amortized Cost
597 
667 
Held to maturity, Subtotal, Amortized Cost
5,242 
5,498 
Held to maturity, Mortgage backed securities, Amortized Cost
2,028 
2,949 
Held-to-maturity Securities
7,270 
8,447 
Held to maturity, Due in 1 year or less, Fair Value
659 
396 
Held to maturity, Due after 1 year through 5, Fair Value
1,950 
2,090 
Held to maturity, Due after 5 years through 10 years, Fair Value
2,267 
2,399 
Held to maturity, Due after 10 years, Fair Value
641 
684 
Held to maturity, Subtotal, Fair Value
5,517 
5,569 
Held to maturity, Mortgage backed securities, Fair Value
2,116 
3,036 
Held to maturity, Fair Value
$ 7,633 
$ 8,605 
Investments (Schedule Of Cost And Fair Value Of Equity Securities) (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Investments, Debt and Equity Securities [Abstract]
 
 
Cost
$ 707 
$ 671 
Gross unrealized appreciation
41 
18 
Gross unrealized depreciation
(4)
(42)
Fair value
$ 744 
$ 647 
Investments (Schedule Of Default Assumptions By Moody's Rating Categories) (Details)
12 Months Ended
Dec. 31, 2012
Investment Grade |
Aaa - Bbb |
Minimum
 
Financing Receivable, Recorded Investment [Line Items]
 
1-in-100 Year Default Rate
0.00% 
Historical Mean Default Rate
0.00% 
Investment Grade |
Aaa - Bbb |
Maximum
 
Financing Receivable, Recorded Investment [Line Items]
 
1-in-100 Year Default Rate
1.40% 
Historical Mean Default Rate
0.30% 
Below Investment Grade |
Ba
 
Financing Receivable, Recorded Investment [Line Items]
 
1-in-100 Year Default Rate
4.90% 
Historical Mean Default Rate
1.10% 
Below Investment Grade |
B
 
Financing Receivable, Recorded Investment [Line Items]
 
1-in-100 Year Default Rate
12.80% 
Historical Mean Default Rate
3.40% 
Below Investment Grade |
Caa - C
 
Financing Receivable, Recorded Investment [Line Items]
 
1-in-100 Year Default Rate
53.40% 
Historical Mean Default Rate
13.80% 
Investments (Net Realized Gains (Losses) And Losses Included In Net Realized Gains (Losses) And Other Comprehensive Income) (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Investments, Debt and Equity Securities [Abstract]
 
 
 
 
 
 
 
 
 
 
 
OTTI on fixed maturities, gross
 
 
 
 
 
 
 
 
$ (26)
$ (61)
$ (115)
OTTI on fixed maturities recognized in OCI (pre-tax)
 
 
 
 
 
 
 
 
1 
15 
69 
OTTI on fixed maturities, net
 
 
 
 
 
 
 
 
(25)
(46)
(46)
Fixed maturities, Gross realized gains excluding OTTI
 
 
 
 
 
 
 
 
388 
410 
569 
Fixed maturities, Gross realized losses excluding OTTI
 
 
 
 
 
 
 
 
(133)
(200)
(143)
Total fixed maturities
 
 
 
 
 
 
 
 
230 
164 
380 
OTTI on equity securities
 
 
 
 
 
 
 
 
(5)
(1)
0 
Equity securities, Gross realized gains excluding OTTI
 
 
 
 
 
 
 
 
11 
15 
86 
Equity securities, Gross realized losses excluding OTTI
 
 
 
 
 
 
 
 
(2)
(5)
(2)
Total equity securities
 
 
 
 
 
 
 
 
4 
9 
84 
OTTI on other investments
 
 
 
 
 
 
 
 
(7)
3 
(13)
Foreign exchange losses
 
 
 
 
 
 
 
 
(16)
(13)
(54)
Investment and embedded derivative instruments
 
 
 
 
 
 
 
 
(6)
(143)
58 
Fair value adjustments on insurance derivative
 
 
 
 
 
 
 
 
171 
(779)
(28)
S&P put options and futures
 
 
 
 
 
 
 
 
(297)
(4)
(150)
Other derivative instruments
 
 
 
 
 
 
 
 
(4)
(4)
(19)
Other
 
 
 
 
 
 
 
 
3 
(22)
174 
Total net realized gains (losses)
272 
(60)
(394)
260 
83 
(760)
(73)
(45)
78 
(795)
432 
Change in net unrealized appreciation (depreciation) on investments, Fixed maturities available for sale
 
 
 
 
 
 
 
 
1,099 
569 
451 
Change in net unrealized appreciation (depreciation) on investments, Fixed maturities held to maturity
 
 
 
 
 
 
 
 
(94)
(89)
522 
Change in net unrealized appreciation (depreciation) on investments, Equity securities
 
 
 
 
 
 
 
 
61 
(47)
(44)
Change in net unrealized appreciation (depreciation) on investments, Other
 
 
 
 
 
 
 
 
50 
40 
(35)
Change in net unrealized appreciation (depreciation) on investments, Income tax expense
 
 
 
 
 
 
 
 
(198)
(157)
(152)
Change in net unrealized appreciation on investments,
 
 
 
 
 
 
 
 
918 
316 
742 
Total net realized gains (losses) and change in net unrealized appreciation (depreciation) on investments
 
 
 
 
 
 
 
 
$ 996 
$ (479)
$ 1,174 
Investments (Schedule Of Other Investments) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Schedule of Cost-method Investments [Line Items]
 
 
Other investments - Total at Fair Value
$ 2,716 
$ 2,314 
Other investments - Total at Cost
2,465 
2,112 
Fair Value
 
 
Schedule of Cost-method Investments [Line Items]
 
 
Investment funds
395 
378 
Limited partnerships
531 
531 
Partially owned investment companies
1,186 
904 
Life insurance policies
148 
127 
Policy loans
164 
143 
Trading securities
243 
194 
Other
49 
37 
Other investments - Total at Fair Value
2,716 
2,314 
Cost
 
 
Schedule of Cost-method Investments [Line Items]
 
 
Investment funds
278 
277 
Limited partnerships
398 
429 
Partially owned investment companies
1,187 
904 
Life insurance policies
148 
127 
Policy loans
164 
143 
Trading securities
242 
195 
Other
48 
37 
Other investments - Total at Cost
$ 2,465 
$ 2,112 
Investments (Schedule Of Investments In Partially-Owned Insurance Companies) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Freisenbruch-Meyer
Bermuda
Dec. 31, 2011
Freisenbruch-Meyer
Bermuda
Dec. 31, 2012
ACE Cooperative Ins. Co. - Saudi Arabia
Saudi Arabia
Dec. 31, 2011
ACE Cooperative Ins. Co. - Saudi Arabia
Saudi Arabia
Dec. 31, 2012
Huatai Group
Dec. 31, 2012
Huatai Group
China
Dec. 31, 2011
Huatai Group
China
Dec. 31, 2012
Huatai Life Insurance Company
China
Dec. 31, 2011
Huatai Life Insurance Company
China
Dec. 31, 2012
Russian Reinsurance Company
Russia
Dec. 31, 2011
Russian Reinsurance Company
Russia
Dec. 31, 2012
Island Heritage
Cayman Islands
Dec. 31, 2011
Island Heritage
Cayman Islands
Investment [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Carrying Value
$ 454 
$ 352 
$ 9 
$ 8 
$ 9 
$ 7 
 
$ 350 
$ 228 
$ 84 
$ 103 
$ 2 
$ 2 
$ 0 
$ 4 
Issued Share Capital
716 
716 
6 
5 
27 
27 
 
474 
457 
205 
196 
4 
4 
0 
27 
Ownership Percentage
 
 
40.00% 
40.00% 
30.00% 
30.00% 
 
20.00% 
20.00% 
20.00% 
20.00% 
23.30% 
23.30% 
0.00% 
10.80% 
Additional investment pending regulatory approval
 
 
 
 
 
 
$ 100 
 
 
 
 
 
 
 
 
Investments (Aggregate Fair Value And Gross Unrealized Loss By Length Of Time Security Has Continuously Been In Unrealized Loss Position) (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Investment [Line Items]
 
 
Investment securities, Unrealized loss position, 0-12 Months, Fair Value
$ 3,968 
$ 5,927 
Investment securities, Unrealized loss position, 0-12 Months, Gross Unrealized Loss
(48.6)
(288.9)
Investment securities, Unrealized loss position, Over 12 Months, Fair Value
577 
1,481 
Investment securities, Unrealized loss position, Over 12 Months, Gross Unrealized Loss
(49.9)
(245.9)
Investment securities, Unrealized loss position, Total Fair Value
4,545 
7,408 
Investment securities, Unrealized loss position, Total Gross Unrealized Loss
(98.5)
(534.8)
U.S. Treasury and agency
 
 
Investment [Line Items]
 
 
Investment securities, Unrealized loss position, 0-12 Months, Fair Value
440 
 
Investment securities, Unrealized loss position, 0-12 Months, Gross Unrealized Loss
(1.4)
 
Investment securities, Unrealized loss position, Over 12 Months, Fair Value
0 
 
Investment securities, Unrealized loss position, Over 12 Months, Gross Unrealized Loss
0 
 
Investment securities, Unrealized loss position, Total Fair Value
440 
 
Investment securities, Unrealized loss position, Total Gross Unrealized Loss
(1.4)
 
Foreign
 
 
Investment [Line Items]
 
 
Investment securities, Unrealized loss position, 0-12 Months, Fair Value
1,234 
1,801 
Investment securities, Unrealized loss position, 0-12 Months, Gross Unrealized Loss
(8.6)
(82.2)
Investment securities, Unrealized loss position, Over 12 Months, Fair Value
88 
529 
Investment securities, Unrealized loss position, Over 12 Months, Gross Unrealized Loss
(5.8)
(40.0)
Investment securities, Unrealized loss position, Total Fair Value
1,322 
2,330 
Investment securities, Unrealized loss position, Total Gross Unrealized Loss
(14.4)
(122.2)
Corporate securities
 
 
Investment [Line Items]
 
 
Investment securities, Unrealized loss position, 0-12 Months, Fair Value
1,026 
3,084 
Investment securities, Unrealized loss position, 0-12 Months, Gross Unrealized Loss
(22.7)
(148.2)
Investment securities, Unrealized loss position, Over 12 Months, Fair Value
85 
268 
Investment securities, Unrealized loss position, Over 12 Months, Gross Unrealized Loss
(7.9)
(32.2)
Investment securities, Unrealized loss position, Total Fair Value
1,111 
3,352 
Investment securities, Unrealized loss position, Total Gross Unrealized Loss
(30.6)
(180.4)
Mortgage backed-securities
 
 
Investment [Line Items]
 
 
Investment securities, Unrealized loss position, 0-12 Months, Fair Value
855 
440 
Investment securities, Unrealized loss position, 0-12 Months, Gross Unrealized Loss
(3.8)
(7.5)
Investment securities, Unrealized loss position, Over 12 Months, Fair Value
356 
586 
Investment securities, Unrealized loss position, Over 12 Months, Gross Unrealized Loss
(32.6)
(170.2)
Investment securities, Unrealized loss position, Total Fair Value
1,211 
1,026 
Investment securities, Unrealized loss position, Total Gross Unrealized Loss
(36.4)
(177.7)
States, municipalities, and political subdivisions
 
 
Investment [Line Items]
 
 
Investment securities, Unrealized loss position, 0-12 Months, Fair Value
316 
30 
Investment securities, Unrealized loss position, 0-12 Months, Gross Unrealized Loss
(3.0)
(0.4)
Investment securities, Unrealized loss position, Over 12 Months, Fair Value
48 
98 
Investment securities, Unrealized loss position, Over 12 Months, Gross Unrealized Loss
(3.6)
(3.5)
Investment securities, Unrealized loss position, Total Fair Value
364 
128 
Investment securities, Unrealized loss position, Total Gross Unrealized Loss
(6.6)
(3.9)
Total fixed maturities
 
 
Investment [Line Items]
 
 
Investment securities, Unrealized loss position, 0-12 Months, Fair Value
3,871 
5,355 
Investment securities, Unrealized loss position, 0-12 Months, Gross Unrealized Loss
(39.5)
(238.3)
Investment securities, Unrealized loss position, Over 12 Months, Fair Value
577 
1,481 
Investment securities, Unrealized loss position, Over 12 Months, Gross Unrealized Loss
(49.9)
(245.9)
Investment securities, Unrealized loss position, Total Fair Value
4,448 
6,836 
Investment securities, Unrealized loss position, Total Gross Unrealized Loss
(89.4)
(484.2)
Equity securities
 
 
Investment [Line Items]
 
 
Investment securities, Unrealized loss position, 0-12 Months, Fair Value
29 
484 
Investment securities, Unrealized loss position, 0-12 Months, Gross Unrealized Loss
(4.2)
(42.3)
Investment securities, Unrealized loss position, Over 12 Months, Fair Value
0 
   
Investment securities, Unrealized loss position, Over 12 Months, Gross Unrealized Loss
0 
   
Investment securities, Unrealized loss position, Total Fair Value
29 
484 
Investment securities, Unrealized loss position, Total Gross Unrealized Loss
(4.2)
(42.3)
Other investments
 
 
Investment [Line Items]
 
 
Investment securities, Unrealized loss position, 0-12 Months, Fair Value
68 
88 
Investment securities, Unrealized loss position, 0-12 Months, Gross Unrealized Loss
(4.9)
(8.3)
Investment securities, Unrealized loss position, Over 12 Months, Fair Value
0 
   
Investment securities, Unrealized loss position, Over 12 Months, Gross Unrealized Loss
0 
   
Investment securities, Unrealized loss position, Total Fair Value
68 
88 
Investment securities, Unrealized loss position, Total Gross Unrealized Loss
$ (4.9)
$ (8.3)
Investments (Schedule Of Sources Of Net Investment Income) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Investments, Debt and Equity Securities [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities
 
 
 
 
 
 
 
 
$ 2,134 
$ 2,196 
$ 2,071 
Short-term investments
 
 
 
 
 
 
 
 
28 
43 
34 
Equity securities
 
 
 
 
 
 
 
 
34 
36 
26 
Other
 
 
 
 
 
 
 
 
104 
62 
44 
Gross investment income
 
 
 
 
 
 
 
 
2,300 
2,337 
2,175 
Investment expenses
 
 
 
 
 
 
 
 
(119)
(95)
(105)
Net investment income
$ 567 
$ 533 
$ 537 
$ 544 
$ 565 
$ 564 
$ 569 
$ 544 
$ 2,181 
$ 2,242 
$ 2,070 
Investments (Schedule Of Components Of Restricted Assets) (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Investments, Debt and Equity Securities [Abstract]
 
 
Trust funds
$ 11,389 
$ 9,940 
Deposits with non-U.S. regulatory authorities
2,133 
2,240 
Assets pledged under reverse repurchase agreements
1,401 
1,251 
Deposits with U.S. regulatory authorities
1,338 
1,307 
Other pledged assets
456 
364 
Total restricted assets
$ 16,717 
$ 15,102 
Fair Value Measurements (Narrative) (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Year
Dec. 31, 2011
Dec. 31, 2010
Fair Value Measurements Of Financial Instruments [Line Items]
 
 
 
GLB - Lapse rate - lower range
1.00% 
 
 
GLB - Lapse rate - upper range
6.00% 
 
 
GLB - Spike lapse rate - lower range
10.00% 
 
 
GLB - Spike lapse rate - upper range
30.00% 
 
 
GLB - Ultimate lapse rate
10.00% 
 
 
GLB - Length of ultimate lapse rate period, years
2 
 
 
GLB - Adjustment factor for valuable guarantees - lower
15.00% 
 
 
GLB - Adjustment factor for valuable guarantees - upper
75.00% 
 
 
Percent of GMIB guaranteed value that are represented by clients with several years of annuitization experience
36.00% 
 
 
GLB - Maximum annuitization rate
8.00% 
 
 
GLB - First year maximum annuitization rate
13.00% 
 
 
GLB - Weighted average maximum annuitization rate - rate 1
8.00% 
 
 
GLB - Weighted average maximum annuitization rate - rate 2
12.00% 
 
 
GLB - Weighted average maximum annuitization rate - rate 3
30.00% 
 
 
Guaranteed Living Benefits, Net Income Impact From Model Refinement
$ 49 
$ 14 
$ 98 
Amounts of transfer from Level 1 to Level 2
40 
 
 
Amounts of transfer from Level 2 to Level 1
15 
 
 
Amounts included in Level 2 previosuly reported in Level 1
$ 417 
 
 
Redemption Notice Periods Lower Range [Member]
 
 
 
Fair Value Measurements Of Financial Instruments [Line Items]
 
 
 
Notice period for redemption for alternative investments investment funds, days
5 days 
 
 
Redemption Notice Periods Upper Range [Member]
 
 
 
Fair Value Measurements Of Financial Instruments [Line Items]
 
 
 
Notice period for redemption for alternative investments investment funds, days
120 days 
 
 
Fair Value Measurements (Financial Instruments Measured At Fair Value On Recurring Basis) (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
$ 47,306 
$ 41,967 
Equity securities
744 
647 
Short-term investments
2,228 
2,301 
Other investments
2,716 
2,314 
Securities lending collateral
1,791 
1,375 
Level 1
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
2,292 
1,923 
Equity securities
253 
215 
Short-term investments
1,503 
1,246 
Other investments
268 
208 
Securities lending collateral
   
   
Investment derivative instruments
11 
10 
Other derivative instruments
(6)
(16)
Separate account assets
872 
607 
Total assets measured at fair value
5,193 
4,193 
GLB
   1
   1
Level 1 |
U.S. Treasury and agency
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
2,050 
1,691 
Level 1 |
Foreign
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
222 
212 
Level 1 |
Corporate securities
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
20 
20 
Level 1 |
Mortgage backed-securities
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
   
   
Level 1 |
States, municipalities, and political subdivisions
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
   
   
Level 2
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
44,839 
39,843 
Equity securities
488 
419 
Short-term investments
725 
1,055 
Other investments
196 
229 
Securities lending collateral
1,791 
1,375 
Investment derivative instruments
   
   
Other derivative instruments
30 
54 
Separate account assets
71 
53 
Total assets measured at fair value
48,140 
43,028 
GLB
   1
   1
Level 2 |
U.S. Treasury and agency
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
1,685 
1,264 
Level 2 |
Foreign
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
13,431 
12,156 
Level 2 |
Corporate securities
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
16,586 
14,539 
Level 2 |
Mortgage backed-securities
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
10,460 
10,173 
Level 2 |
States, municipalities, and political subdivisions
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
2,677 
1,711 
Level 3
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
175 
201 
Equity securities
3 
13 
Short-term investments
   
   
Other investments
2,252 
1,877 
Securities lending collateral
   
   
Investment derivative instruments
   
   
Other derivative instruments
   
3 
Separate account assets
   
   
Total assets measured at fair value
2,430 
2,094 
GLB
1,119 1
1,319 1
Level 3 |
U.S. Treasury and agency
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
   
5 
Level 3 |
Foreign
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
60 
33 
Level 3 |
Corporate securities
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
102 
134 
Level 3 |
Mortgage backed-securities
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
13 
28 
Level 3 |
States, municipalities, and political subdivisions
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
   
1 
Total
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
47,306 
41,967 
Equity securities
744 
647 
Short-term investments
2,228 
2,301 
Other investments
2,716 
2,314 
Securities lending collateral
1,791 
1,375 
Investment derivative instruments
11 
10 
Other derivative instruments
24 
41 
Separate account assets
943 
660 
Total assets measured at fair value
55,763 
49,315 
GLB
1,119 1
1,319 1
Total |
U.S. Treasury and agency
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
3,735 
2,960 
Total |
Foreign
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
13,713 
12,401 
Total |
Corporate securities
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
16,708 
14,693 
Total |
Mortgage backed-securities
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
10,473 
10,201 
Total |
States, municipalities, and political subdivisions
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
$ 2,677 
$ 1,712 
Fair Value Measurements (Schedule Of Significant Unobservable Inputs Used In Level 3 Liability Valuations) (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
Valuation Technique
Actuarial model 1
Minimum
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
Significant Unobservable Inputs Lapse rate
1.00% 1
Significant Unobservable Inputs Annuitization rate
0.00% 1
Maximum
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
Significant Unobservable Inputs Lapse rate
30.00% 1
Significant Unobservable Inputs Annuitization rate
50.00% 1
Guaranteed Minimum Income Benefit
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
Fair Value
$ 1,119 1
Fair Value Measurements (Financial Instruments Measured At Fair Value Using Significant Unobservable Inputs) (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended 12 Months Ended
Dec. 31, 2012
U.S. Treasury and agency
Available-for-sale Debt Securities
Dec. 31, 2011
U.S. Treasury and agency
Available-for-sale Debt Securities
Dec. 31, 2012
Foreign
Available-for-sale Debt Securities
Dec. 31, 2011
Foreign
Available-for-sale Debt Securities
Dec. 31, 2010
Foreign
Available-for-sale Debt Securities
Dec. 31, 2012
Corporate securities
Available-for-sale Debt Securities
Dec. 31, 2011
Corporate securities
Available-for-sale Debt Securities
Dec. 31, 2010
Corporate securities
Available-for-sale Debt Securities
Dec. 31, 2012
Mortgage backed-securities
Available-for-sale Debt Securities
Dec. 31, 2011
Mortgage backed-securities
Available-for-sale Debt Securities
Dec. 31, 2010
Mortgage backed-securities
Available-for-sale Debt Securities
Dec. 31, 2012
States, municipalities, and political subdivisions
Available-for-sale Debt Securities
Dec. 31, 2011
States, municipalities, and political subdivisions
Available-for-sale Debt Securities
Dec. 31, 2010
States, municipalities, and political subdivisions
Available-for-sale Debt Securities
Dec. 31, 2012
Equity securities
Dec. 31, 2011
Equity securities
Dec. 31, 2010
Equity securities
Dec. 31, 2012
Other investments
Dec. 31, 2011
Other investments
Dec. 31, 2010
Other investments
Dec. 31, 2012
Other derivative instruments
Dec. 31, 2011
Other derivative instruments
Dec. 31, 2010
Other derivative instruments
Dec. 31, 2012
Guaranteed Living Benefits [Member]
Dec. 31, 2011
Guaranteed Living Benefits [Member]
Dec. 31, 2010
Guaranteed Living Benefits [Member]
Dec. 31, 2009
Guaranteed Living Benefits [Member]
Dec. 31, 2012
Guaranteed Minimum Income Benefit
Dec. 31, 2011
Guaranteed Minimum Income Benefit
Dec. 31, 2010
Guaranteed Minimum Income Benefit
Assets [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance- Beginning of Period, Assets
$ 5 
    
$ 33 
$ 26 
$ 59 
$ 134 
$ 115 
$ 168 
$ 28 
$ 39 
$ 21 
$ 1 
$ 2 
$ 3 
$ 13 
$ 13 
$ 12 
$ 1,877 
$ 1,432 
$ 1,149 
$ 3 
$ 4 
$ 14 
 
 
 
 
 
 
 
Transfers into Level 3, Assets
   
   
49 
9 
 
37 
42 
 
22 
4 
 
1 
   
 
2 
   
 
53 
   
 
   
   
 
 
 
 
 
 
 
 
Transfers out of Level 3, Assets
(4)
   
(13)
(18)
 
(46)
(4)
 
(35)
(48)
 
(1)
   
 
(11)
   
 
   
   
 
   
   
 
 
 
 
 
 
 
 
Transfers into (Out of) Level 3, Assets
 
 
 
 
(14)
 
 
(25)
 
 
(1)
 
 
0 
 
 
1 
 
 
0 
 
 
0 
 
 
 
 
 
 
 
Change in Net Unrealized Gains (Losses) included in OCI, Assets
   
   
(1)
(1)
1 
6 
(2)
9 
   
   
   
   
   
   
   
(1)
   
55 
93 
53 
   
   
   
 
 
 
 
 
 
   1
Net Realized Gains/Losses, Assets
   
   
   
   
1 
(1)
(3)
(3)
   
   
   
   
   
   
   
4 
1 
(7)
(3)
(7)
(4)
2 
2 
 
 
 
 
 
 
 
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Gain (Loss) Included in Earnings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(200)2
812 3
64 1
Purchases, Assets
   
5 
46 
23 
 
24 
32 
 
9 
59 
 
   
   
 
4 
5 
 
520 
602 
 
3 
   
 
 
 
 
 
 
 
 
Sales, Assets
   
   
(53)
(3)
 
(19)
(27)
 
(7)
(17)
 
   
   
 
(5)
(8)
 
(9)
(55)
 
   
   
 
 
 
 
 
 
 
 
Settlements, Assets
(1)
   
(1)
(3)
 
(33)
(19)
 
(4)
(9)
 
(1)
(1)
 
   
   
 
(237)
(192)
 
(2)
(3)
 
 
 
 
 
 
 
 
Purchases, Sales, Issuances, and Settlements, Net, Assets
 
 
 
 
(21)
 
 
(34)
 
 
19 
 
 
(1)
 
 
(1)
 
 
237 
 
 
(12)
 
 
 
 
 
 
 
Balance-End of Period, Assets
   
5 
60 
33 
26 
102 
134 
115 
13 
28 
39 
   
1 
2 
3 
13 
13 
2,252 
1,877 
1,432 
   
3 
4 
 
 
 
 
 
 
 
Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet Date, Assets
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
(7)
(3)
(7)
   
(1)
1 
 
 
 
 
 
 
 
Liabilities [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance- Beginning of Period, Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,319 2 3
507 1 3
443 1
Transfers into Level 3, Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   2
   3
0 1
Transfers out of Level 3, Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   2
   3
 
Changes in Net Unrealized Gain (Losses) included in OCI, Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   2
   3
 
Purchases, Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   2
   3
 
Sales, Liabilites
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   2
   3
 
Settlements, Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   2
   3
 
Purchases, Sales, Issuances, and Settlements, Net, Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0 1
Balance- End of Period, Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,119 2
1,319 2 3
507 1 3
Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet Date, Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(200)2
812 3
64 1
Reported liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 1,400 
$ 1,500 
$ 648 
$ 559 
 
 
 
Fair Value Measurements (Carrying Values And Fair Values Of Financial Instruments Not Measured At Fair Value) (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total Fixed maturities held to maturity
$ 7,633 
 
Partially-owned insurance companies
454 
 
Total assets
8,087 
 
Short-term debt
1,401 
 
Long-term debt
3,916 
 
Trust preferred securities
446 
 
Total liabilities
5,763 
 
U.S. Treasury and agency
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total Fixed maturities held to maturity
1,083 
 
Foreign
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total Fixed maturities held to maturity
964 
 
Corporate securities
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total Fixed maturities held to maturity
2,275 
 
Mortgage backed-securities
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total Fixed maturities held to maturity
2,116 
 
States, municipalities, and political subdivisions
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total Fixed maturities held to maturity
1,195 
 
Carrying Value
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total Fixed maturities held to maturity
7,270 
8,447 
Partially-owned insurance companies
454 
352 
Total assets
7,724 
8,799 
Short-term debt
1,401 
1,251 
Long-term debt
3,360 
3,360 
Trust preferred securities
309 
309 
Total liabilities
5,070 
4,920 
Carrying Value |
U.S. Treasury and agency
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total Fixed maturities held to maturity
1,044 
1,078 
Carrying Value |
Foreign
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total Fixed maturities held to maturity
910 
935 
Carrying Value |
Corporate securities
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total Fixed maturities held to maturity
2,133 
2,338 
Carrying Value |
Mortgage backed-securities
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total Fixed maturities held to maturity
2,028 
2,949 
Carrying Value |
States, municipalities, and political subdivisions
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total Fixed maturities held to maturity
1,155 
1,147 
Fair Value
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total Fixed maturities held to maturity
7,633 
8,605 
Partially-owned insurance companies
454 
352 
Total assets
8,087 
8,957 
Short-term debt
1,401 
1,251 
Long-term debt
3,916 
3,823 
Trust preferred securities
446 
404 
Total liabilities
5,763 
5,478 
Fair Value |
U.S. Treasury and agency
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total Fixed maturities held to maturity
1,083 
1,126 
Fair Value |
Foreign
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total Fixed maturities held to maturity
964 
930 
Fair Value |
Corporate securities
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total Fixed maturities held to maturity
2,275 
2,337 
Fair Value |
Mortgage backed-securities
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total Fixed maturities held to maturity
2,116 
3,036 
Fair Value |
States, municipalities, and political subdivisions
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total Fixed maturities held to maturity
$ 1,195 
$ 1,176 
Fair Value Measurements (Financial Instruments Not Carried At Fair Value) (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
$ 7,633 
Partially-owned insurance companies
454 
Total assets
8,087 
Short-term debt
1,401 
Long-term debt
3,916 
Trust preferred securities
446 
Total liabilities
5,763 
Level 1
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
619 
Partially-owned insurance companies
   
Total assets
619 
Short-term debt
   
Long-term debt
   
Trust preferred securities
   
Total liabilities
   
Level 2
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
6,996 
Partially-owned insurance companies
   
Total assets
6,996 
Short-term debt
1,401 
Long-term debt
3,916 
Trust preferred securities
446 
Total liabilities
5,763 
Level 3
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
18 
Partially-owned insurance companies
454 
Total assets
472 
Short-term debt
   
Long-term debt
   
Trust preferred securities
   
Total liabilities
   
U.S. Treasury and agency
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
1,083 
U.S. Treasury and agency |
Level 1
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
619 
U.S. Treasury and agency |
Level 2
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
464 
U.S. Treasury and agency |
Level 3
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
   
Foreign
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
964 
Foreign |
Level 1
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
   
Foreign |
Level 2
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
964 
Foreign |
Level 3
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
   
Corporate securities
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
2,275 
Corporate securities |
Level 1
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
   
Corporate securities |
Level 2
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
2,257 
Corporate securities |
Level 3
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
18 
Mortgage backed-securities
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
2,116 
Mortgage backed-securities |
Level 1
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
   
Mortgage backed-securities |
Level 2
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
2,116 
Mortgage backed-securities |
Level 3
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
   
States, municipalities, and political subdivisions
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
1,195 
States, municipalities, and political subdivisions |
Level 1
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
   
States, municipalities, and political subdivisions |
Level 2
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
1,195 
States, municipalities, and political subdivisions |
Level 3
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Total Fixed maturities held to maturity
   
Reinsurance (Consolidated Reinsurance) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Premiums written [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Direct
 
 
 
 
 
 
 
 
$ 18,144 
$ 17,626 
$ 15,887 
Assumed
 
 
 
 
 
 
 
 
3,449 
3,205 
3,624 
Ceded
 
 
 
 
 
 
 
 
(5,518)
(5,459)
(5,803)
Net
 
 
 
 
 
 
 
 
16,075 
15,372 
13,708 
Premiums earned [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Direct
 
 
 
 
 
 
 
 
17,802 
17,534 
15,780 
Assumed
 
 
 
 
 
 
 
 
3,302 
3,349 
3,516 
Ceded
 
 
 
 
 
 
 
 
(5,427)
(5,496)
(5,792)
Net premiums earned
$ 3,848 
$ 4,665 
$ 3,783 
$ 3,381 
$ 3,831 
$ 4,490 
$ 3,757 
$ 3,309 
$ 15,677 
$ 15,387 
$ 13,504 
Reinsurance (Reinsurance Recoverable on Ceded Reinsurance) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Reinsurance Disclosures [Abstract]
 
 
 
 
Reinsurance recoverable on unpaid losses and loss expenses
$ 11,399 
$ 11,602 
$ 12,149 
$ 12,745 
Reinsurance recoverable on paid losses and loss expenses
679 
787 
 
 
Net reinsurance recoverable on losses and loss expenses
$ 12,078 
$ 12,389 
 
 
Reinsurance (Reinsurance Recoverable by Category and Listing of Largest Reinsurers) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
 
 
2012
$ 12,517 
 
Provision
439 
479 
% of Gross
3.50% 
 
Largest reinsurers
 
 
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
 
 
2012
5,800 
 
Provision
98 
 
% of Gross
1.70% 
 
Other reinsurers balances rated A- or better
 
 
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
 
 
2012
3,080 
 
Provision
40 
 
% of Gross
1.30% 
 
Other reinsurers balances with ratings lower than A- or not rated
 
 
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
 
 
2012
602 
 
Provision
120 
 
% of Gross
19.90% 
 
Other pools and government agencies
 
 
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
 
 
2012
383 
 
Provision
14 
 
% of Gross
3.70% 
 
Structured settlements
 
 
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
 
 
2012
582 
 
Provision
24 
 
% of Gross
4.10% 
 
Other captives
 
 
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
 
 
2012
1,761 
 
Provision
14 
 
% of Gross
0.80% 
 
Other
 
 
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
 
 
2012
309 
 
Provision
$ 129 
 
% of Gross
41.70% 
 
Reinsurance Reinsurance (Assumed Life Reinsurance Programs Involving Minimum Benefit Guarantees Under Annuity Contracts - Schedule Of Guaranteed Minimum Benefits Income And Expense) (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Guaranteed Minimum Benefits [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums earned
$ 3,848 
$ 4,665 
$ 3,783 
$ 3,381 
$ 3,831 
$ 4,490 
$ 3,757 
$ 3,309 
$ 15,677 
$ 15,387 
$ 13,504 
Policy benefits and other reserve adjustments
142 
130 
102 
147 
119 
83 
108 
91 
521 
401 
357 
Net realized gains (losses) including OTTI
272 
(60)
(394)
260 
83 
(760)
(73)
(45)
78 
(795)
432 
GMDB
 
 
 
 
 
 
 
 
 
 
 
Guaranteed Minimum Benefits [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums earned
 
 
 
 
 
 
 
 
85 
98 
109 
Policy benefits and other reserve adjustments
 
 
 
 
 
 
 
 
60 
59 
99 
GLB
 
 
 
 
 
 
 
 
 
 
 
Guaranteed Minimum Benefits [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums earned
 
 
 
 
 
 
 
 
160 
163 
164 
Policy benefits and other reserve adjustments
 
 
 
 
 
 
 
 
61 
47 
29 
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
203 
(812)
(64)
Gain (loss) recognized in income
 
 
 
 
 
 
 
 
302 
(696)
71 
Net cash received
 
 
 
 
 
 
 
 
149 
161 
160 
Net (increase) decrease in liability
 
 
 
 
 
 
 
 
$ 153 
$ (857)
$ (89)
Reinsurance (Assumed Life Reinsurance Programs Involving Minimum Benefit Guarantees Under Annuity Contracts - Narrative) (Detail) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2012
Guaranteed Minimum Death Benefit
Dec. 31, 2011
Guaranteed Minimum Death Benefit
Dec. 31, 2012
Guaranteed Minimum Deaths Benefits And Guaranteed Living Benefits [Member]
Dec. 31, 2011
Guaranteed Minimum Deaths Benefits And Guaranteed Living Benefits [Member]
Dec. 31, 2012
Guaranteed Living Benefits [Member]
Dec. 31, 2011
Guaranteed Living Benefits [Member]
Dec. 31, 2010
Guaranteed Living Benefits [Member]
Dec. 31, 2009
Guaranteed Living Benefits [Member]
Guaranteed Minimum Benefits [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Reinsurance recoveries on losses and loss expenses incurred
$ 4,300,000,000 
$ 3,300,000,000 
$ 3,300,000,000 
 
 
 
 
 
 
 
 
Provision for uncollectible reinsurance
439,000,000 
479,000,000 
 
 
 
 
 
 
 
 
 
Reported liabilities
 
 
 
90,000,000 
138,000,000 
 
 
1,400,000,000 
1,500,000,000 
648,000,000 
559,000,000 
Fair value derivative adjustment in liability
 
 
 
 
 
 
 
1,100,000,000 
1,300,000,000 
 
 
Net amount at risk
 
 
 
1,300,000,000 
1,800,000,000 
 
 
445,000,000 
380,000,000 
 
 
Mortality percentage according to Annuity 2000 mortality table
 
 
 
 
 
100.00% 
 
 
 
 
 
Discounting assumption used in the calculation of the benefit reserve averaging - lower range
 
 
 
1.00% 
 
1.50% 
 
3.50% 
 
 
 
Discounting assumption used in the calculation of the benefit reserve averaging - upper range
 
 
 
2.00% 
 
2.50% 
 
4.50% 
 
 
 
Total claim amount payable, if all of the Company's cedants' policyholders covered were to die immediately
 
 
 
495,000,000 
 
640,000,000 
 
 
 
 
 
GMBD net amount of risk
 
 
 
 
 
116,000,000 
182,000,000 
 
 
 
 
GLB net amount of risk
 
 
 
 
 
$ 655,000,000 
$ 998,000,000 
 
 
 
 
Average attained age of all policyholders under all benefits reinsured, years
68 years 
 
 
 
 
 
 
 
 
 
 
intangible Assets (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Goodwill and Intangible Assets Disclosure [Abstract]
 
 
 
Goodwill
$ 4,319 
$ 4,148 
$ 4,030 
Other intangible assets
656 
651 
 
Intangible assets subject to amortization
554 
 
 
Intangible assets not subject to amortization
102 
 
 
Amortization expense related to other intangible assets
$ 51 
$ 29 
$ 9 
Intangible Assets (Roll-forward of Goodwill, by Business Segment) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Goodwill [Roll Forward]
 
 
Balance at beginning of period
$ 4,148 
$ 4,030 
Purchase price allocation adjustment
4 
(7)
Foreign exchange revaluation and other
44 
(6)
Balance at end of period
4,319 
4,148 
Insurance - North American
 
 
Goodwill [Roll Forward]
 
 
Balance at beginning of period
1,350 
1,351 
Purchase price allocation adjustment
0 
(12)
Foreign exchange revaluation and other
3 
0 
Balance at end of period
1,353 
1,350 
Insurance - Overseas General
 
 
Goodwill [Roll Forward]
 
 
Balance at beginning of period
1,603 
1,564 
Purchase price allocation adjustment
0 
5 
Foreign exchange revaluation and other
38 
3 
Balance at end of period
1,764 
1,603 
Global Reinsurance
 
 
Goodwill [Roll Forward]
 
 
Balance at beginning of period
365 
365 
Purchase price allocation adjustment
0 
0 
Foreign exchange revaluation and other
0 
0 
Balance at end of period
365 
365 
Life
 
 
Goodwill [Roll Forward]
 
 
Balance at beginning of period
830 
750 
Purchase price allocation adjustment
4 
0 
Foreign exchange revaluation and other
3 
(9)
Balance at end of period
837 
830 
New York Life's Korea and Hong Kong
 
 
Goodwill [Roll Forward]
 
 
Acquisition
 
89 
New York Life's Korea and Hong Kong |
Insurance - North American
 
 
Goodwill [Roll Forward]
 
 
Acquisition
 
0 
New York Life's Korea and Hong Kong |
Insurance - Overseas General
 
 
Goodwill [Roll Forward]
 
 
Acquisition
 
0 
New York Life's Korea and Hong Kong |
Global Reinsurance
 
 
Goodwill [Roll Forward]
 
 
Acquisition
 
0 
New York Life's Korea and Hong Kong |
Life
 
 
Goodwill [Roll Forward]
 
 
Acquisition
 
89 
Penn Millers Holding Corporation
 
 
Goodwill [Roll Forward]
 
 
Acquisition
 
11 
Penn Millers Holding Corporation |
Insurance - North American
 
 
Goodwill [Roll Forward]
 
 
Acquisition
 
11 
Penn Millers Holding Corporation |
Insurance - Overseas General
 
 
Goodwill [Roll Forward]
 
 
Acquisition
 
0 
Penn Millers Holding Corporation |
Global Reinsurance
 
 
Goodwill [Roll Forward]
 
 
Acquisition
 
0 
Penn Millers Holding Corporation |
Life
 
 
Goodwill [Roll Forward]
 
 
Acquisition
 
0 
Rio Guayas
 
 
Goodwill [Roll Forward]
 
 
Acquisition
 
31 
Rio Guayas |
Insurance - North American
 
 
Goodwill [Roll Forward]
 
 
Acquisition
 
0 
Rio Guayas |
Insurance - Overseas General
 
 
Goodwill [Roll Forward]
 
 
Acquisition
 
31 
Rio Guayas |
Global Reinsurance
 
 
Goodwill [Roll Forward]
 
 
Acquisition
 
0 
Rio Guayas |
Life
 
 
Goodwill [Roll Forward]
 
 
Acquisition
 
0 
JaPro
 
 
Goodwill [Roll Forward]
 
 
Acquisition
123 
 
JaPro |
Insurance - North American
 
 
Goodwill [Roll Forward]
 
 
Acquisition
0 
 
JaPro |
Insurance - Overseas General
 
 
Goodwill [Roll Forward]
 
 
Acquisition
123 
 
JaPro |
Global Reinsurance
 
 
Goodwill [Roll Forward]
 
 
Acquisition
0 
 
JaPro |
Life
 
 
Goodwill [Roll Forward]
 
 
Acquisition
$ 0 
 
Intangible Assets (Value Of Business Acquired (VOBA) Roll-forward) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Movement in Intangible Assets Arising from Insurance Contracts Acquired in Business Combination [Roll Forward]
 
 
 
Balance, beginning of year
$ 676 
$ 634 
$ 748 
Acquisition of New York Life's Korea operations and Hong Kong operations
0 
151 
0 
Amortization expense
(82)
(108)
(111)
Foreign exchange revaluation
20 
(1)
(3)
Balance, end of year
$ 614 
$ 676 
$ 634 
Unpaid losses and loss expenses (Narrative) (Details) (USD $)
12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2004
Dec. 31, 2010
Insurance - North American
Dec. 31, 2012
Insurance - Overseas General
Dec. 31, 2011
Insurance - Overseas General
Dec. 31, 2010
Insurance - Overseas General
Dec. 31, 2012
Insurance - Overseas General
Long tail
Dec. 31, 2011
Insurance - Overseas General
Long tail
Dec. 31, 2012
Insurance - Overseas General
Long tail
Casualty and financial lines
2007 and prior
Dec. 31, 2011
Insurance - Overseas General
Long tail
Casualty and financial lines
2007 and prior
Dec. 31, 2012
Insurance - Overseas General
Long tail
Casualty and financial lines
2008 to 2010
Dec. 31, 2011
Insurance - Overseas General
Long tail
Casualty and financial lines
2008 to 2010
Dec. 31, 2012
Insurance - Overseas General
Short tail
Property, marine, A&H, and energy lines
2008 to 2009
Dec. 31, 2011
Insurance - Overseas General
Short tail
Property, marine, A&H, and energy lines
2008 to 2009
Dec. 31, 2012
Global Reinsurance
Dec. 31, 2011
Global Reinsurance
Dec. 31, 2010
Global Reinsurance
Dec. 31, 2012
Global Reinsurance
Long tail
Dec. 31, 2011
Global Reinsurance
Long tail
Dec. 31, 2012
Global Reinsurance
Long tail
Other lines
Dec. 31, 2012
Global Reinsurance
Long tail
Professional liability, D&O, casualty, and medical malpractice
2007 and prior
Dec. 31, 2011
Global Reinsurance
Long tail
Professional liability, D&O, casualty, and medical malpractice
2007 and prior
Dec. 31, 2012
Global Reinsurance
Long tail
Non Medical Professional Liability [Member]
2005 and prior
Dec. 31, 2012
Global Reinsurance
Short tail
2009 and prior
Dec. 31, 2011
Global Reinsurance
Short tail
2009 and prior
Dec. 31, 2012
Penn Millers
Dec. 31, 2012
Brandywine
Dec. 31, 2011
Brandywine
Dec. 31, 2012
Westchester Specialty
Dec. 31, 2011
Westchester Specialty
Dec. 31, 1998
Westchester Specialty
Dec. 31, 2012
Ace Bermuda [Member]
Dec. 31, 2012
Net of NICO Coverage
Brandywine
Dec. 31, 2012
Net of NICO Coverage
Westchester Specialty
Dec. 31, 2012
Minimum
Dec. 31, 2012
Run Off [Member]
Insurance - North American
Dec. 31, 2011
Run Off [Member]
Insurance - North American
Dec. 31, 2012
Run Off [Member]
Insurance - North American
Brandywine and Westchester Specialty runoff
Dec. 31, 2011
Run Off [Member]
Insurance - North American
Brandywine and Westchester Specialty runoff
Dec. 31, 2012
Run Off [Member]
Insurance - North American
Completion of reserve review
Dec. 31, 2011
Run Off [Member]
Insurance - North American
Completion of reserve review
Dec. 31, 2012
Active [Member]
Insurance - North American
Dec. 31, 2011
Active [Member]
Insurance - North American
Dec. 31, 2012
Active [Member]
Insurance - North American
Other lines
Dec. 31, 2011
Active [Member]
Insurance - North American
Other lines
Dec. 31, 2012
Active [Member]
Insurance - North American
Long tail
Dec. 31, 2011
Active [Member]
Insurance - North American
Long tail
Dec. 31, 2012
Active [Member]
Insurance - North American
Long tail
Directors and Officers (D&O) Portfolio
2006 and prior
Dec. 31, 2011
Active [Member]
Insurance - North American
Long tail
Directors and Officers (D&O) Portfolio
2006 and prior
Dec. 31, 2012
Active [Member]
Insurance - North American
Long tail
Excess casualty business
2005 and prior
Dec. 31, 2011
Active [Member]
Insurance - North American
Long tail
Excess casualty business
2005 and prior
Dec. 31, 2012
Active [Member]
Insurance - North American
Long tail
Medical risk operations
Dec. 31, 2011
Active [Member]
Insurance - North American
Long tail
Medical risk operations
Dec. 31, 2012
Active [Member]
Insurance - North American
Long tail
National accounts portfolio
Dec. 31, 2011
Active [Member]
Insurance - North American
Long tail
National accounts portfolio
Dec. 31, 2011
Active [Member]
Insurance - North American
Long tail
Financial solutions business
2002 to 2010
Dec. 31, 2011
Active [Member]
Insurance - North American
Long tail
Foreign casualty Products
2007 and prior
Dec. 31, 2011
Active [Member]
Insurance - North American
Long tail
Surety business
2009
Dec. 31, 2011
Active [Member]
Insurance - North American
Long tail
Errors and omissions coverage
2007 to 2008
Dec. 31, 2011
Active [Member]
Insurance - North American
Long tail
Environmental liability product line
2005 to 2007
Dec. 31, 2012
Active [Member]
Insurance - North American
Short tail
Dec. 31, 2011
Active [Member]
Insurance - North American
Short tail
Dec. 31, 2012
Active [Member]
Insurance - North American
Short tail
Other lines
Dec. 31, 2011
Active [Member]
Insurance - North American
Short tail
Other lines
Dec. 31, 2012
Active [Member]
Insurance - North American
Short tail
Property portfolios
2009 to 2010
Dec. 31, 2011
Active [Member]
Insurance - North American
Short tail
Property portfolios
2009 to 2010
Unpaid Losses and Loss Expenses [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net losses and loss expenses incurred in prior years
$ 479,000,000 
$ 556,000,000 
$ 503,000,000 
 
$ 107,000,000 
$ 226,000,000 
$ 290,000,000 
$ 290,000,000 
$ 121,000,000 
$ 154,000,000 
$ 150,000,000 
$ 337,000,000 
$ (29,000,000)
$ (183,000,000)
$ 105,000,000 
$ 136,000,000 
$ 61,000,000 
$ 71,000,000 
$ 106,000,000 
$ 32,000,000 
$ 58,000,000 
$ (4,000,000)
$ 54,000,000 
$ 79,000,000 
$ (18,000,000)
$ 29,000,000 
$ 13,000,000 
 
 
 
 
 
 
 
 
 
 
 
$ (3,000,000)
$ (168,000,000)
$ (102,000,000)
$ (150,000,000)
$ (82,000,000)
$ (360,000,000)
$ 297,000,000 
$ 9,000,000 
$ (25,000,000)
$ 245,000,000 
$ 186,000,000 
$ 67,000,000 
$ 82,000,000 
$ 73,000,000 
$ 54,000,000 
$ 57,000,000 
$ 43,000,000 
$ 39,000,000 
$ 28,000,000 
$ 26,000,000 
$ 26,000,000 
$ 21,000,000 
$ (40,000,000)
$ (29,000,000)
$ 115,000,000 
$ 111,000,000 
$ 27,000,000 
$ 63,000,000 
$ 88,000,000 
$ 48,000,000 
Prior period net unpaid reserves represented by prior period development (percent)
 
 
 
 
(0.70%)
(3.10%)
(4.20%)
(4.30%)
 
 
 
 
 
 
 
 
(2.70%)
(3.10%)
(4.70%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.00% 
(0.60%)
 
 
(2.20%)
(1.90%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unallocated loss adjustment expenses due to operating expenses paid and reserved
(10,132,000,000)
(10,076,000,000)
(8,082,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(18,000,000)
(17,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A & E - change in net loss reserves
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
146,000,000 
76,000,000 
4,000,000 
6,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A & E - change in gross loss reserves
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
275,000,000 
241,000,000 
17,000,000 
(29,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A & E - loss reserves, net - closing
1,102,000,000 
1,304,000,000 
 
 
 
84,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,000,000 
852,000,000 
 
151,000,000 
 
 
12,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A & E - incurred activity, net
134,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
110,000,000 
 
22,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NICO reinsurance protection on losses and loss expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,500,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Incurred activity
9,653,000,000 
9,520,000,000 
7,579,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
129,000,000 
4,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NICO pro-rata share of reinsurance protection (percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
75.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NICO reinsurance protection on losses and loss expenses incurred on or before 12/31/1996, net of retenion
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,000,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NICO retention for losses and loss expenses incurred on or before 12/31/1996
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
721,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NICO pro-rata share of reinsurance protection (percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
85.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NICO reinsurance protection on losses and loss expenses incurred on or before 12/31/1992, net of retenion
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
150,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NICO retention for losses and loss expenses incurred on or before 12/31/1992
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
755,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NICO remaining unused limit under the 1998 agreement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
492,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividend retention fund established by INA Financial Corporation
50,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Required minimum balance under the dividend retention fund
50,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contributions to the dividend retention fund
0 
35,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Minimum contribution from the dividend retention fund to Century not required for XOL agreement
200,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reinsurance coverage to Century provided by ACE INA under XOL
800,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Statutory surplus of century
25,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Century Statutory Basis Losses Cede To X O L
394,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INA Holdings contibutions to Century in exchange for a surplus note
 
 
 
100,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate reinsurance balances ceded by active ACE companies to Century
958,000,000 
877,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Century's carried gross reserves (including reserves ceded by active ACE companies)
2,100,000,000 
2,400,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Minimum number of years related to portion of ceded liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Century remaining NICO cover on a paid loss basis
18,000,000 
386,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate of losses ceded by Century to the active ACE companies and other amounts owed to Century by active ACE companies
$ 402,000,000 
$ 171,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unpaid losses and loss expenses (Unpaid Losses and Loss Expenses Rollforward) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Unpaid Losses and Loss Expenses [Roll Forward]
 
 
 
Gross unpaid losses and loss expenses, beginning of year
$ 37,477 
$ 37,391 
$ 37,783 
Reinsurance recoverable on unpaid losses
11,602 
12,149 
12,745 
Balance at beginning of year
25,875 
25,242 
25,038 
Acquistion of subsidiaries
14 
92 
145 
Total
25,889 
25,334 
25,183 
Net losses and loss expenses incurred in respect of losses incurring in Current Year
10,132 
10,076 
8,082 
Net losses and loss expenses incurred in respect of losses incurring in Prior Year
(479)
(556)
(503)
Total
9,653 
9,520 
7,579 
Net losses and loss expenses incurred in respect of losses paid in Current Year
4,325 
4,209 
2,689 
Net losses and loss expenses incurred in respect of losses paid in Prior Year
4,894 
4,657 
4,724 
Total
9,219 
8,866 
7,413 
Foreign currency revaluation and other
224 
(113)
(107)
Balance at end of year
26,547 
25,875 
25,242 
Reinsurance recoverable on unpaid losses
11,399 
11,602 
12,149 
Gross unpaid losses and loss expenses, end of year
$ 37,946 
$ 37,477 
$ 37,391 
Unpaid losses and loss expenses (A&E Loss Roll-forward) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Unpaid Losses and Loss Expenses [Roll Forward]
 
Balance (gross) at December 31, 2011
$ 2,331 
Balance (net) at December 31, 2011
1,304 
Incurred activity, gross
251 
Incurred activity, net
134 
Paid activity, gross
(518)
Paid activity, net
(336)
Balance (gross) at December 31, 2012
2,064 
Balance (net) at December 31, 2012
1,102 
Asbestos
 
Unpaid Losses and Loss Expenses [Roll Forward]
 
Balance (gross) at December 31, 2011
2,086 
Balance (net) at December 31, 2011
1,142 
Incurred activity, gross
211 
Incurred activity, net
95 
Paid activity, gross
(440)
Paid activity, net
(275)
Balance (gross) at December 31, 2012
1,857 
Balance (net) at December 31, 2012
962 
Environmental
 
Unpaid Losses and Loss Expenses [Roll Forward]
 
Balance (gross) at December 31, 2011
245 
Balance (net) at December 31, 2011
162 
Incurred activity, gross
40 
Incurred activity, net
39 
Paid activity, gross
(78)
Paid activity, net
(61)
Balance (gross) at December 31, 2012
207 
Balance (net) at December 31, 2012
$ 140 
Unpaid losses and loss expenses (Brandywine Incurred Loss Activity) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Unpaid Losses and Loss Expenses [Roll Forward]
 
 
 
Balance at beginning of year
$ 25,875 
$ 25,242 
$ 25,038 
Incurred activity
9,653 
9,520 
7,579 
Paid activity
9,219 
8,866 
7,413 
Balance at end of year
26,547 
25,875 
25,242 
Brandywine |
A&E
 
 
 
Unpaid Losses and Loss Expenses [Roll Forward]
 
 
 
Balance at beginning of year
1,032 
 
 
Incurred activity
110 
 
 
Paid activity
(290)
 
 
Balance at end of year
852 
 
 
Brandywine |
Other
 
 
 
Unpaid Losses and Loss Expenses [Roll Forward]
 
 
 
Balance at beginning of year
458 1
 
 
Incurred activity
19 1
 
 
Paid activity
(56)1
 
 
Balance at end of year
421 1
 
 
Brandywine |
Total
 
 
 
Unpaid Losses and Loss Expenses [Roll Forward]
 
 
 
Balance at beginning of year
1,490 
 
 
Incurred activity
129 
 
 
Paid activity
(346)
 
 
Balance at end of year
1,273 
 
 
Brandywine |
NICO Coverage
 
 
 
Unpaid Losses and Loss Expenses [Roll Forward]
 
 
 
Balance at beginning of year
386 
 
 
Incurred activity
0 
 
 
Paid activity
(368)
 
 
Balance at end of year
18 
 
 
Brandywine |
Net of NICO Coverage
 
 
 
Unpaid Losses and Loss Expenses [Roll Forward]
 
 
 
Balance at beginning of year
1,104 
 
 
Incurred activity
129 
 
 
Paid activity
22 
 
 
Balance at end of year
$ 1,255 
 
 
Unpaid losses and loss expenses (Westchester Incurred Loss Activity) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Unpaid Losses and Loss Expenses [Roll Forward]
 
 
 
Balance at beginning of year
$ 25,875 
$ 25,242 
$ 25,038 
Incurred activity
9,653 
9,520 
7,579 
Paid activity
9,219 
8,866 
7,413 
Balance at end of year
26,547 
25,875 
25,242 
Westchester Specialty |
A&E
 
 
 
Unpaid Losses and Loss Expenses [Roll Forward]
 
 
 
Balance at beginning of year
144 
 
 
Incurred activity
22 
 
 
Paid activity
(15)
 
 
Balance at end of year
151 
 
 
Westchester Specialty |
Other
 
 
 
Unpaid Losses and Loss Expenses [Roll Forward]
 
 
 
Balance at beginning of year
54 1
 
 
Incurred activity
(6)1
 
 
Paid activity
(4)1
 
 
Balance at end of year
44 1
 
 
Westchester Specialty |
Total
 
 
 
Unpaid Losses and Loss Expenses [Roll Forward]
 
 
 
Balance at beginning of year
198 
 
 
Incurred activity
16 
 
 
Paid activity
(19)
 
 
Balance at end of year
195 
 
 
Westchester Specialty |
NICO Coverage
 
 
 
Unpaid Losses and Loss Expenses [Roll Forward]
 
 
 
Balance at beginning of year
165 
 
 
Incurred activity
12 
 
 
Paid activity
(19)
 
 
Balance at end of year
158 
 
 
Westchester Specialty |
Net of NICO Coverage
 
 
 
Unpaid Losses and Loss Expenses [Roll Forward]
 
 
 
Balance at beginning of year
33 
 
 
Incurred activity
4 
 
 
Paid activity
0 
 
 
Balance at end of year
$ 37 
 
 
Taxation (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Income Tax Examination [Line Items]
 
 
 
Significant Change in Unrecognized Tax Benefits is Reasonably Possible, Amount of Unrecorded Benefit
$ 18 
$ 1 
 
Valuation allowance
56 
57 
 
Unrecognized tax benefits that would affect the effective tax rate
8 
 
 
Tax-related interest and penalties reported in the consolidated statements of operations
(8)
3 
(1)
Liabilities recorded for tax-related interest and penalties
12 
22 
 
Domestic Tax Authority [Member]
 
 
 
Income Tax Examination [Line Items]
 
 
 
Net operating loss carry-forwards
157 
 
 
Switzerland
 
 
 
Income Tax Examination [Line Items]
 
 
 
Applicable income tax rates
7.83% 
 
 
Foreign Tax Authority [Member]
 
 
 
Income Tax Examination [Line Items]
 
 
 
Foreign tax credit carry-forward
$ 76 
 
 
Bermuda
 
 
 
Income Tax Examination [Line Items]
 
 
 
Applicable income tax rates
0.00% 
 
 
U.S.
 
 
 
Income Tax Examination [Line Items]
 
 
 
Applicable income tax rates
35.00% 
 
 
U.K.
 
 
 
Income Tax Examination [Line Items]
 
 
 
Applicable income tax rates
24.50% 
 
 
Taxation (Provision For Income Taxes) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Income Tax Disclosure [Abstract]
 
 
 
Current tax expense
$ 305 
$ 485 
$ 443 
Deferred tax expense
(35)
17 
110 
Provision for income taxes
$ 270 
$ 502 
$ 553 
Taxation (Reconciliation Of The Difference Between The Provision for Income Taxes and the Expected Tax Provision at Swiss Statutory Income Tax Rate) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Income Tax Disclosure [Abstract]
 
 
 
Expected tax provision at Swiss statutory rate
$ 233 
$ 160 
$ 285 
Taxes on earnings subject to rates other that Swiss statutory rate
129 
323 
327 
Tax exempt interest and dividends received deduction, net of proration
(24)
(21)
(20)
Net witholding taxes
23 
19 
15 
Favorable resolution of prior years' tax matters and closing of statutes of limitations
(124)
0 
(21)
Change in valuation allowance
4 
(2)
(3)
Non-taxable acquisition gain
0 
0 
(61)
Other
29 
23 
31 
Provision for income taxes
$ 270 
$ 502 
$ 553 
Taxation (Components Of Net Deferred Tax Assets) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Deferred Tax Assets, Gross [Abstract]
 
 
Loss reserve discount
$ 849 
$ 933 
Unearned premium reserve
98 
85 
Foreign tax credits
1,131 
1,074 
Investments
43 
67 
Provision for uncollectible balances
110 
113 
Loss carry-forwards
55 
43 
Other, net
110 
31 
Cumulative translation adjustment
0 
5 
Total deferred tax assets
2,396 
2,351 
Deferred Tax Liabilities, Gross [Abstract]
 
 
Deferred policy acquisition costs
68 
47 
VOBA and other intangible assets
379 
372 
Un-remitted foreign earnings
795 
810 
Unrealized appreciation on investments
586 
392 
Deferred Tax Liabilities, Unrealized Currency Transaction Gains
59 
0 
Total deferred tax liabilities
1,887 
1,621 
Valuation allowance
56 
57 
Net deferred tax assets
$ 453 
$ 673 
Taxation (Reconciliation of Unrecognized Tax Benefits) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
 
 
Unrecognized Tax Benefits, beginning of year
$ 134 
$ 139 
Additions based on tax provisions related to the current year
19 
1 
Reduction for tax positions of prior years
0 
(6)
Reductions for settlements with tax authorities
(16)
0 
Reductions for the lapse of the applicable statutes of limitations
(111)
0 
Unrecognized Tax Benefits, end of year
$ 26 
$ 134 
Debt (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Senior Notes
Dec. 31, 2011
Senior Notes
Dec. 31, 2012
Senior Notes
ACE INA senior notes due 2014
Dec. 31, 2011
Senior Notes
ACE INA senior notes due 2014
Jun. 30, 2004
Senior Notes
ACE INA senior notes due 2014
Dec. 31, 2012
Senior Notes
ACE INA senior notes due 2015
Dec. 31, 2011
Senior Notes
ACE INA senior notes due 2015
May 31, 2008
Senior Notes
ACE INA senior notes due 2015
Dec. 31, 2012
Senior Notes
ACE INA senior notes due 2015
Dec. 31, 2011
Senior Notes
ACE INA senior notes due 2015
Nov. 30, 2010
Senior Notes
ACE INA senior notes due 2015
Dec. 31, 2012
Senior Notes
ACE INA senior notes due 2017
Dec. 31, 2011
Senior Notes
ACE INA senior notes due 2017
Feb. 28, 2007
Senior Notes
ACE INA senior notes due 2017
Dec. 31, 2012
Senior Notes
ACE INA senior notes due 2018
Dec. 31, 2011
Senior Notes
ACE INA senior notes due 2018
Feb. 29, 2008
Senior Notes
ACE INA senior notes due 2018
Dec. 31, 2012
Senior Notes
ACE INA senior notes due 2019
Dec. 31, 2011
Senior Notes
ACE INA senior notes due 2019
Jun. 30, 2009
Senior Notes
ACE INA senior notes due 2019
Dec. 31, 2012
Senior Notes
ACE INA senior notes due 2036
Dec. 31, 2011
Senior Notes
ACE INA senior notes due 2036
May 31, 2006
Senior Notes
ACE INA senior notes due 2036
Dec. 31, 2012
Senior Notes
Pennsylvania Industrial Development Authority (PIDA)
Aug. 30, 2005
Senior Notes
Pennsylvania Industrial Development Authority (PIDA)
Dec. 31, 2012
Senior Notes
City Of Philadelphia Urban Development Action Grant
Dec. 30, 1999
Senior Notes
City Of Philadelphia Urban Development Action Grant
Dec. 31, 2012
Senior secured debentures
ACE INA debentures due 2029
Dec. 31, 2011
Senior secured debentures
ACE INA debentures due 2029
Aug. 31, 1999
Senior secured debentures
ACE INA debentures due 2029
Dec. 31, 2012
Trust Preferred Securities
ACE INA capital securities due 2030
Mar. 31, 2000
Trust Preferred Securities
ACE INA capital securities due 2030
Dec. 31, 2012
Reverse repurchase agreements
Dec. 31, 2011
Reverse repurchase agreements
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term debt
$ 1,401 
$ 1,251 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 1,401 
$ 1,251 
Weighted average interest rate on short-term debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.40% 
 
Debt issued
 
 
 
 
 
 
500 
 
 
450 
 
 
700 
 
 
500 
 
 
300 
 
 
500 
 
 
300 
 
10 
 
8 
 
 
100 
309 
300 
 
 
Long-term debt stated interest rate
 
 
 
 
 
 
5.875% 
 
 
5.60% 
 
 
2.60% 
 
 
5.70% 
 
 
5.80% 
 
 
5.90% 
 
 
6.70% 
 
2.75% 
 
7.10% 
 
 
8.875% 
9.70% 
9.70% 
 
 
Additional percentage on 'make-whole' premium
 
 
 
 
 
 
0.20% 
 
 
0.35% 
 
 
0.20% 
 
 
0.20% 
 
 
0.35% 
 
 
0.40% 
 
 
0.20% 
 
 
 
 
 
 
 
 
 
 
 
Current amount of long-term debt outstanding
3,360 
3,360 
3,360 
3,360 
500 
500 
 
449 
449 
 
699 
699 
 
500 
500 
 
300 
300 
 
500 
500 
 
299 
299 
 
6 
 
7 
 
100 
100 
 
 
 
 
 
ACE Capital Trust II common securities purchased
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 9.2 
 
 
Percent of principal amount of Subordinated Debentures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100.00% 
 
 
 
Debt (Schedule of Debt Outstanding) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Debt Instrument [Line Items]
 
 
Short-term debt
$ 1,401 
$ 1,251 
Long-term debt
3,360 
3,360 
Trust preferred securities
309 
309 
Senior Notes
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
3,360 
3,360 
Senior Notes |
ACE INA senior notes due 2014
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
500 
500 
Senior Notes |
ACE INA senior notes due 2015
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
449 
449 
Senior Notes |
ACE INA senior notes due 2015
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
699 
699 
Senior Notes |
ACE INA senior notes due 2017
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
500 
500 
Senior Notes |
ACE INA senior notes due 2018
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
300 
300 
Senior Notes |
ACE INA senior notes due 2019
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
500 
500 
Senior Notes |
ACE INA senior notes due 2036
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
299 
299 
Senior Notes |
Other
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
13 
13 
Senior secured debentures |
ACE INA debentures due 2029
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
100 
100 
Trust Preferred Securities |
ACE INA capital securities due 2030
 
 
Debt Instrument [Line Items]
 
 
Trust preferred securities
309 
309 
Reverse repurchase agreements
 
 
Debt Instrument [Line Items]
 
 
Short-term debt
$ 1,401 
$ 1,251 
Commitments, contingencies, and guarantees (Narrative) (Detail) (USD $)
12 Months Ended 2 Months Ended
Dec. 31, 2012
derivative
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2012
Revolving Credit Facility [Member]
Dec. 31, 2012
Letter of Credit [Member]
Dec. 31, 2012
Letter Of Credit Unsecured Expiring November 2017
Letter of Credit [Member]
Dec. 31, 2012
Letter Of Credit Unsecured Expiring September 2014
Letter of Credit [Member]
Dec. 31, 2012
Letter Of Credit Bilateral Uncollateralized Expiring December 2017
Letter of Credit [Member]
Feb. 27, 2013
Subsequent Event [Member]
Feb. 27, 2013
November 2011 Stock Repurchase Plan [Member]
Subsequent Event [Member]
Commitments Contingencies And Guarantees [Line Items]
 
 
 
 
 
 
 
 
 
 
Repurchase of outstanding common shares, shares
100,000 
2,058,860 
4,926,082 
 
 
 
 
 
 
1,746,123 
Number of positions in TBAs
0 
 
 
 
 
 
 
 
 
 
Number of in-force interest rate swaps
0 
 
 
 
 
 
 
 
 
 
Number of in-force credit default swaps
0 
 
 
 
 
 
 
 
 
 
Approximate percentage of gross premiums written that were generated from or placed by Marsh
11.00% 
12.00% 
 
 
 
 
 
 
 
 
Approximate percentage of gross premiums written that were generated from or placed by Aon
 
10.00% 
 
 
 
 
 
 
 
 
Carrying value of limited partnerships and partially-owned investment companies included in other investments
$ 1,700,000,000 
 
 
 
 
 
 
 
 
 
Funding commitments relating to limited partnerships and partially-owned investment companies
1,200,000,000 
 
 
 
 
 
 
 
 
 
Line of Credit Facility, Current Borrowing Capacity
 
 
 
 
1,000,000,000 
 
 
 
 
 
Borrowing capacity on unsecured revolving line of credit
 
 
 
 
 
1,500,000,000 
500,000,000 
425,000,000 
 
 
Line of Credit Facility, Capacity Available for Specific Purpose Other than for Trade Purchases
 
 
 
500,000,000 
 
300,000,000 
 
 
 
 
Line of Credit Facility, Amount Outstanding
 
 
 
 
 
619,000,000 
 
400,000,000 
 
 
Litigation Settlement, Gross
4,200,000 
 
 
 
 
 
 
 
 
 
Total rental expense related to operating leases
112,000,000 
114,000,000 
83,000,000 
 
 
 
 
 
 
 
Cost of shares acquired
7,000,000 
132,000,000 
303,000,000 
 
 
 
 
 
 
149,000,000 
Share repurchase authorization remaining
$ 461,000,000 
 
 
 
 
 
 
 
$ 312,000,000 
 
Commitments, contingencies, and guarantees (Balance Sheet Locations, Fair Values In Asset Or (Liability) Position, And Notional Values/Payment Provisions Of Derivative Instruments) (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Investment And Embedded Derivative Instruments [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
$ 320 
$ 427 
Notional Value/Payment Provision
4,574 
12,906 
Other Derivative Instruments [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
24 
41 
Notional Value/Payment Provision
2,558 
1,973 
Accounts Payable, Accrued Expenses, And Other Liabilities [Member] |
Foreign Exchange Future [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
0 
7 
Notional Value/Payment Provision
620 
674 
Accounts Payable, Accrued Expenses, And Other Liabilities [Member] |
Cross Currency Swap [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
0 
0 
Notional Value/Payment Provision
50 
0 
Accounts Payable, Accrued Expenses, And Other Liabilities [Member] |
Futures Contracts On Money Market Instruments [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
1 
7 
Notional Value/Payment Provision
2,710 
10,476 
Accounts Payable, Accrued Expenses, And Other Liabilities [Member] |
Futures contracts on notes and bonds [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
10 
(4)
Notional Value/Payment Provision
915 
1,055 
Accounts Payable, Accrued Expenses, And Other Liabilities [Member] |
Options On Money Market Instruments [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
0 
0 
Notional Value/Payment Provision
0 
292 
Accounts Payable, Accrued Expenses, And Other Liabilities [Member] |
Single-Stock Future [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
(6)1
(16)1
Notional Value/Payment Provision
2,308 1
1,367 1
Accounts Payable, Accrued Expenses, And Other Liabilities [Member] |
Options On Equity Market Indices [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
30 1
54 1
Notional Value/Payment Provision
250 1
250 1
Accounts Payable, Accrued Expenses, And Other Liabilities [Member] |
Credit Default Swap [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
0 
3 
Notional Value/Payment Provision
0 
350 
Accounts Payable, Accrued Expenses, And Other Liabilities [Member] |
Other
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
0 
0 
Notional Value/Payment Provision
0 
6 
Fixed Maturities Available For Sale [Member] |
Convertibles and Bonds with Warrants Attached [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
309 
357 
Notional Value/Payment Provision
279 
353 
Fixed Maturities Available For Sale [Member] |
Dollar Rolls [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
0 
60 
Notional Value/Payment Provision
0 
56 
Accounts Payable Future Policy Benefits [Member] |
Guaranteed Living Benefits [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
(1,352)2
(1,505)2
Notional Value/Payment Provision
$ 1,100 2
$ 1,378 2
Commitments, contingencies, and guarantees (Net Realized Gains (Losses) Of Derivative Instrument Activity In Consolidated Statement Of Operations) (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Commitments Contingencies And Guarantees [Line Items]
 
 
 
Net realized gains (losses)
$ (136)
$ (930)
$ (139)
Foreign Exchange Future [Member]
 
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
 
Net realized gains (losses)
(9)
6 
21 
All Other Futures Contracts And Options [Member]
 
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
 
Net realized gains (losses)
(22)
(98)
29 
Convertibles and Bonds with Warrants Attached [Member]
 
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
 
Net realized gains (losses)
25 
(50)
7 
Dollar Rolls [Member]
 
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
 
Net realized gains (losses)
0 
(1)
1 
Investment And Embedded Derivative Instruments [Member]
 
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
 
Net realized gains (losses)
(6)
(143)
58 
Guaranteed Living Benefits [Member]
 
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
 
Net realized gains (losses)
171 1
(779)1
(28)1
Single-Stock Future [Member]
 
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
 
Net realized gains (losses)
(273)2
(12)2
(140)2
Options On Equity Market Indices [Member]
 
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
 
Net realized gains (losses)
(24)2
8 2
(10)2
Interest Rate Swap [Member]
 
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
 
Net realized gains (losses)
0 2
0 2
(21)2
Credit Default Swap [Member]
 
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
 
Net realized gains (losses)
(4)
(4)
1 
Other Derivatives
 
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
 
Net realized gains (losses)
0 2
0 2
1 2
Guaranteed Living Benefit And Other Derivative Instruments [Member]
 
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
 
Net realized gains (losses)
$ (130)
$ (787)
$ (197)
Commitments, contingencies, and guarantees (Future Minimum Lease Payments) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Commitments and Contingencies Disclosure [Abstract]
 
2013
$ 91 
2014
79 
2015
69 
2016
60 
2017
51 
Thereafter
151 
Total minimum future lease commitments
$ 501 
Shareholders' equity (Detail)
In Millions, except Share data, unless otherwise specified
12 Months Ended 1 Months Ended
Dec. 31, 2012
USD ($)
Dec. 31, 2012
CHF
Dec. 31, 2011
USD ($)
Dec. 31, 2011
CHF
Dec. 31, 2010
USD ($)
Dec. 31, 2010
CHF
Dec. 31, 2012
General Purpose
Dec. 31, 2012
Issuance of Debt
Dec. 31, 2012
Employee Benefit Plans
Aug. 31, 2011
November 2010 Stock Repurchase Plan [Member]
USD ($)
Nov. 30, 2010
November 2010 Stock Repurchase Plan [Member]
USD ($)
Stockholders' Equity Note [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Dividend installments
$ 0.47 
 
$ 0.35 
 
 
 
 
 
 
 
 
Common shares in treasury, shares
2,510,878 
2,510,878 
5,905,136 
5,905,136 
6,151,707 
6,151,707 
 
 
 
 
 
Conditional Share Issuance, by Scenario [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Repurchase of outstanding common shares, shares
100,000 
100,000 
2,058,860 
2,058,860 
4,926,082 
4,926,082 
 
 
 
 
 
Cost of shares acquired
$ 7 
 
$ 132 
 
$ 303 
 
 
 
 
 
 
Authorized share capital for general purposes
 
 
 
 
 
 
140,000,000 
33,000,000 
25,410,929 
 
 
Stock repurchase program authorized amount
 
 
 
 
 
 
 
 
 
303 
600 
Share repurchase authorization remaining
$ 461 
 
 
 
 
 
 
 
 
$ 197 
 
The number of votes associated with one Common Share
1 
1 
 
 
 
 
 
 
 
 
 
The maximum ownership percentage for voting allowed for any one shareholder
10.00% 
10.00% 
 
 
 
 
 
 
 
 
 
Par value reduction per common share
 
 1.38 
 
 0.30 
 
 
 
 
 
 
 
Dividends declared per common share
$ 2.06 
 1.91 
$ 1.38 
 1.22 
$ 1.30 
 1.31 
 
 
 
 
 
Shareholders' equity (Rollforward Of Changes In Common Stock Shares Issued And Outstanding) (Details)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Changes In Common Stock Shares Issues And Outstanding [Roll Forward]
 
 
 
Shares issued, beginning of year
342,832,412 
341,094,559 
337,841,616 
Shares issued, net
0 
0 
2,268,000 
Exercise of stock options
0 
1,737,853 
984,943 
Shares issued, end of year
342,832,412 
342,832,412 
341,094,559 
Common Shares in treasury, end of year
(2,510,878)
(5,905,136)
(6,151,707)
Shares issued and outstanding, end of year
340,321,534 
336,927,276 
334,942,852 
Balance, beginning of year
(9,467)
(101,481)
(101,481)
Shares redeemed
0 
92,014 
0 
Balance, end of year
(9,467)
(9,467)
(101,481)
Share-based compensation (Narrative) (Detail) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended 12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2012
Stock options
Dec. 31, 2012
Restricted stock
Dec. 31, 2011
Restricted stock
Dec. 31, 2010
Restricted stock
Dec. 31, 2009
Restricted stock
Dec. 31, 2012
Restricted Stock Units (RSUs)
Dec. 31, 2011
Restricted Stock Units (RSUs)
Dec. 31, 2010
Restricted Stock Units (RSUs)
Dec. 31, 2012
ACE Limited 2004 Long-Term Incentive Plan
Restricted stock
Dec. 31, 2012
Common shares
ACE Limited 2004 Long-Term Incentive Plan
May 31, 2012
Common shares
ACE Limited 2004 Long-Term Incentive Plan
Dec. 31, 2004
Common shares
ACE Limited 2004 Long-Term Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common shares authorized for issuance under plan
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30,600,000 
Common shares available for future issuance under plan
 
 
 
 
 
 
 
 
 
 
 
 
6,593,991 
 
 
Vesting period of award
 
 
 
3 years 
 
 
 
 
 
 
 
4 years 
 
 
 
Cmmon shares authorized for issuance under the ESPP
 
 
 
 
 
 
 
 
 
 
 
 
 
1,500,000 
 
Common shares remaining as available for issuance under the ESPP
 
 
 
 
 
 
 
 
 
 
 
 
1,491,053 
 
 
Unrecognized compensation expense related to the unvested share-based awards
$ 119 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average expected recognition period for the unrecognized compensation expense
1 year 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock option term in years
 
 
 
10 years 
 
 
 
 
 
 
 
 
 
 
 
Weighted average remaining contractual term for stock options outstanding
6 years 2 months 6 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average remaining contractual term for stock options exercisable
4 years 9 months 12 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash received from exercise of stock options
95 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restricted stock awards granted to non-management directors
25,669 
32,660 
36,248 
 
 
 
 
 
 
 
 
 
 
 
 
Restricted stock units awarded to employees and officers of ACE and subsidiaries during period
 
 
 
 
1,589,178 
1,808,745 
2,461,076 
 
262,549 
261,214 
326,091 
 
 
 
 
Weighted average grant-day fair value of restricted stock units granted to employees and officers of the company (US$ per share)
 
 
 
 
$ 73.46 
$ 60.01 
$ 51.09 
 
$ 73.41 
$ 62.85 
$ 50.36 
 
 
 
 
Number of unvested restricted stock units outstanding
 
 
 
 
4,254,847 
4,851,490 
5,305,732 
4,873,429 
637,085 
 
 
 
 
 
 
Number of deferred restricted stock units
 
 
 
 
 
 
 
 
196,431 
 
 
 
 
 
 
Amounts paid during period by employees for the purchase of shares under the ESPP
$ 13 
$ 12 
$ 10 
 
 
 
 
 
 
 
 
 
 
 
 
Number of shares purchased during period by employees pursuant to the provisions of the ESPP
198,244 
205,812 
240,979 
 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation (Pre-tax and After-tax Share-based Compensation Expense) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Restricted stock
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
Share-based compensation expense, pre-tax
$ 109 
$ 108 
$ 111 
Share-based compensation expense, after-tax
64 
70 
79 
Stock options
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
Share-based compensation expense, pre-tax
22 
23 
28 
Share-based compensation expense, after-tax
17 
17 
20 
Additional Paid-in Capital
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
Excess Tax Benefit (Tax Deficiency) from Share-based Compensation, Financing Activities
$ 18 
$ 6 
$ (1)
Share-based compensation (Weighted Average Assumptions for Option Grants) (Details) (Options)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Options
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Dividend yield
2.70% 
2.20% 
2.50% 
Expected volatility
29.80% 
28.80% 
30.30% 
Risk-free interest rate
1.10% 
2.30% 
2.50% 
Forfeiture rate
6.50% 
6.50% 
7.50% 
Expected life
5 years 9 months 18 days 
5 years 4 months 24 days 
5 years 4 months 24 days 
Share-based compensation (Rollforward Of Company's Stock Options) (Details) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Number of Options [Roll Forward]
 
 
 
Number of option outstanding, beginning of period
10,579,507 
11,942,893 
11,483,104 
Number of options granted
1,462,103 
1,649,824 
2,094,227 
Number of options exercised
(2,401,869)
(2,741,238)
(1,328,715)
Number of options forfeited
(190,082)
(271,972)
(305,723)
Number of option outstanding, end of period
9,449,659 
10,579,507 
11,942,893 
Number of options exercisable, December 31, 2012
6,446,407 
 
 
Weighted-Average Exercise Price [Roll Forward]
 
 
 
Weighted-average exercise price of options outstanding, beginning of period (US$ oer share)
$ 49.78 
$ 46.80 
$ 45.46 
Weighted-average exercise price of options granted (US$ per share)
$ 73.36 
$ 62.68 
$ 50.38 
Weighted-average exercise price of options exercised (US$ per share)
$ 42.50 
$ 44.45 
$ 40.11 
Weighted average exercise price of options forfeited (US$ per share)
$ 61.87 
$ 51.33 
$ 49.77 
Weighted-average exercise price of options outstanding, end of period (US$ oer share
$ 55.03 
$ 49.78 
$ 46.80 
Weighted average exercise price of options exercisable, December 31, 2012 (US$ per share)
$ 50.26 
 
 
Options, Weighted-Average Fair Value and Total Intrinsic Value [Abstract]
 
 
 
Weighted-average fair value of stock options granted (US$ per share)
$ 15.58 
$ 14.67 
$ 12.09 
Total intrinsic value of options exercised
$ 78 
$ 63 
$ 22 
Total intrinsic value of options outstanding
234 
 
 
Total intrinsic value of options exercisable, December 31, 2012
$ 190 
 
 
Share-based compensation (Rollforward Of Company's Restricted Stock) (Details) (Restricted stock, USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Restricted stock
 
 
 
Number of Restricted Stock [Roll Forward]
 
 
 
Number of unvested restricted stock, beginning of period
4,851,490 
5,305,732 
4,873,429 
Number of restricted stock, granted
1,589,178 
1,808,745 
2,461,076 
Number of restricted stock, vested and issued
(1,923,385)
(1,929,189)
(1,771,423)
Number of restricted stock, forfeited
(262,436)
(333,798)
(257,350)
Number of unvested restricted stock, end of period
4,254,847 
4,851,490 
5,305,732 
Weighted-Average Grant-Day Fair Value [Roll Forward]
 
 
 
Weighted average grant-day fair value of unvested restricted stock outstanding, beginning of period (US$ per share)
$ 52.20 
$ 48.74 
$ 48.25 
Weighted average grant-day fair value of restricted stock, granted (US$ per share)
$ 73.46 
$ 60.01 
$ 51.09 
Weighted average grant-day fair value of restricted stock, vested and issued (US$ per share)
$ 52.71 
$ 50.82 
$ 50.79 
Weighted average grant-day fair value of restricted stock, forfeited (US$ per share)
$ 58.40 
$ 47.46 
$ 47.93 
Weighted average grant-day fair value of unvested restricted stock outstanding, end of period (US$ per share)
$ 59.53 
$ 52.20 
$ 48.74 
Pension plans (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Compensation and Retirement Disclosure [Abstract]
 
 
 
Expenses recognized during period under the defined contributions plans
$ 99 
$ 96 
$ 87 
Fair value of plan assets
487 
434 
 
Projected benefit obligation
531 
508 
 
Accrued pension liability
44 
74 
 
Defined pension plan contribution expected for 2013
18 
 
 
Estimated net actuarial loss expected to be amortized from AOCI
3 
 
 
Benefit payments made during period
37 
21 
 
Benefit payments for settlement of a defined benefit plan
$ 12 
 
 
Pension plans (Schedule of Expected Future Benefit Payments) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Compensation and Retirement Disclosure [Abstract]
 
2013
$ 21 
2014
21 
2015
23 
2016
24 
2017
22 
2018-2022
$ 127 
Other (income) expense (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Component of Other Income, Nonoperating [Line Items]
 
 
 
Other (income) expense
$ (6)
$ 81 
$ (10)
Equity in net (income) loss of partially-owned entities
 
 
 
Component of Other Income, Nonoperating [Line Items]
 
 
 
Other (income) expense
(80)
(32)
(75)
Amortization of intangible assets
 
 
 
Component of Other Income, Nonoperating [Line Items]
 
 
 
Other (income) expense
51 
29 
9 
(Gains) losses from fair value changes in seperate account assets
 
 
 
Component of Other Income, Nonoperating [Line Items]
 
 
 
Other (income) expense
(29)
36 
0 
Acquisition-related costs
 
 
 
Component of Other Income, Nonoperating [Line Items]
 
 
 
Other (income) expense
11 
5 
14 
Federal excise and capital taxes
 
 
 
Component of Other Income, Nonoperating [Line Items]
 
 
 
Other (income) expense
22 
20 
19 
Other
 
 
 
Component of Other Income, Nonoperating [Line Items]
 
 
 
Other (income) expense
$ 19 
$ 23 
$ 23 
Segment Information (Operations By Segment) (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
$ 16,075 
$ 15,372 
$ 13,708 
Net premiums earned
3,848 
4,665 
3,783 
3,381 
3,831 
4,490 
3,757 
3,309 
15,677 
15,387 
13,504 
Losses and loss expenses
2,683 
3,047 
2,119 
1,804 
2,286 
2,745 
2,226 
2,263 
9,653 
9,520 
7,579 
Policy benefits
142 
130 
102 
147 
119 
83 
108 
91 
521 
401 
357 
Policy acquisition costs
 
 
 
 
 
 
 
 
2,446 
2,472 
2,345 
Administrative expenses
 
 
 
 
 
 
 
 
2,096 
2,068 
1,873 
Underwriting income (loss)
 
 
 
 
 
 
 
 
961 
926 
1,350 
Net investment income
567 
533 
537 
544 
565 
564 
569 
544 
2,181 
2,242 
2,070 
Net realized gains (losses) including OTTI
272 
(60)
(394)
260 
83 
(760)
(73)
(45)
78 
(795)
432 
Interest expense
 
 
 
 
 
 
 
 
250 
250 
224 
Other (income) expense
 
 
 
 
 
 
 
 
(6)
81 
(10)
(Gains) losses from fair value changes in separate account assets
 
 
 
 
 
 
 
 
(29)
36 
 
Other
 
 
 
 
 
 
 
 
23 
45 
 
Income tax expense (benefit)
 
 
 
 
 
 
 
 
270 
502 
553 
Net income (loss)
765 
640 
328 
973 
735 
(39)
594 
250 
2,706 
1,540 
3,085 
Insurance - North American
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
7,208 
6,851 
5,797 
Net premiums earned
 
 
 
 
 
 
 
 
7,019 
6,911 
5,651 
Losses and loss expenses
 
 
 
 
 
 
 
 
5,626 
5,276 
3,918 
Policy benefits
 
 
 
 
 
 
 
 
   
   
   
Policy acquisition costs
 
 
 
 
 
 
 
 
586 
612 
626 
Administrative expenses
 
 
 
 
 
 
 
 
601 
592 
561 
Underwriting income (loss)
 
 
 
 
 
 
 
 
206 
431 
546 
Net investment income
 
 
 
 
 
 
 
 
1,091 
1,170 
1,138 
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
42 
34 
417 
Interest expense
 
 
 
 
 
 
 
 
12 
15 
9 
Other (income) expense
 
 
 
 
 
 
 
 
 
 
(22)
(Gains) losses from fair value changes in separate account assets
 
 
 
 
 
 
 
 
   
0 
 
Other
 
 
 
 
 
 
 
 
(9)
5 
 
Income tax expense (benefit)
 
 
 
 
 
 
 
 
200 
395 
435 
Net income (loss)
 
 
 
 
 
 
 
 
1,136 
1,220 
1,679 
Insurance - Overseas General
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
5,863 
5,629 
5,189 
Net premiums earned
 
 
 
 
 
 
 
 
5,740 
5,614 
5,153 
Losses and loss expenses
 
 
 
 
 
 
 
 
2,862 
3,029 
2,615 
Policy benefits
 
 
 
 
 
 
 
 
   
   
   
Policy acquisition costs
 
 
 
 
 
 
 
 
1,353 
1,335 
1,209 
Administrative expenses
 
 
 
 
 
 
 
 
935 
939 
837 
Underwriting income (loss)
 
 
 
 
 
 
 
 
590 
311 
492 
Net investment income
 
 
 
 
 
 
 
 
521 
546 
473 
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
103 
33 
123 
Interest expense
 
 
 
 
 
 
 
 
5 
5 
1 
Other (income) expense
 
 
 
 
 
 
 
 
 
 
(13)
(Gains) losses from fair value changes in separate account assets
 
 
 
 
 
 
 
 
   
   
 
Other
 
 
 
 
 
 
 
 
3 
   
 
Income tax expense (benefit)
 
 
 
 
 
 
 
 
133 
164 
171 
Net income (loss)
 
 
 
 
 
 
 
 
1,073 
721 
929 
Global Reinsurance
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
1,025 
979 
1,075 
Net premiums earned
 
 
 
 
 
 
 
 
1,002 
1,003 
1,071 
Losses and loss expenses
 
 
 
 
 
 
 
 
553 
621 
518 
Policy benefits
 
 
 
 
 
 
 
 
   
   
   
Policy acquisition costs
 
 
 
 
 
 
 
 
172 
185 
204 
Administrative expenses
 
 
 
 
 
 
 
 
51 
52 
55 
Underwriting income (loss)
 
 
 
 
 
 
 
 
226 
145 
294 
Net investment income
 
 
 
 
 
 
 
 
290 
287 
288 
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
6 
(50)
93 
Interest expense
 
 
 
 
 
 
 
 
4 
2 
   
Other (income) expense
 
 
 
 
 
 
 
 
 
 
(23)
(Gains) losses from fair value changes in separate account assets
 
 
 
 
 
 
 
 
   
   
 
Other
 
 
 
 
 
 
 
 
(15)
(1)
 
Income tax expense (benefit)
 
 
 
 
 
 
 
 
15 
30 
42 
Net income (loss)
 
 
 
 
 
 
 
 
518 
351 
656 
Life
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Management underwriting income loss Insurance
 
 
 
 
 
 
 
 
402 
 
 
Net premiums written
 
 
 
 
 
 
 
 
1,979 
1,913 
1,647 
Net premiums earned
 
 
 
 
 
 
 
 
1,916 
1,859 
1,629 
Losses and loss expenses
 
 
 
 
 
 
 
 
611 
593 
528 
Policy benefits
 
 
 
 
 
 
 
 
521 
401 
357 
Policy acquisition costs
 
 
 
 
 
 
 
 
334 
339 
306 
Administrative expenses
 
 
 
 
 
 
 
 
328 
317 
246 
Underwriting income (loss)
 
 
 
 
 
 
 
 
122 
209 
192 
Net investment income
 
 
 
 
 
 
 
 
251 
226 
174 
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
(72)
(806)
(192)
Interest expense
 
 
 
 
 
 
 
 
12 
11 
3 
Other (income) expense
 
 
 
 
 
 
 
 
 
 
26 
(Gains) losses from fair value changes in separate account assets
 
 
 
 
 
 
 
 
(29)
36 
 
Other
 
 
 
 
 
 
 
 
25 
26 
 
Income tax expense (benefit)
 
 
 
 
 
 
 
 
58 
50 
59 
Net income (loss)
 
 
 
 
 
 
 
 
235 
(494)
86 
Corporate and Other
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
   
   
   
Net premiums earned
 
 
 
 
 
 
 
 
   
   
   
Losses and loss expenses
 
 
 
 
 
 
 
 
1 
1 
   
Policy benefits
 
 
 
 
 
 
 
 
   
   
   
Policy acquisition costs
 
 
 
 
 
 
 
 
1 
1 
   
Administrative expenses
 
 
 
 
 
 
 
 
181 
168 
174 
Underwriting income (loss)
 
 
 
 
 
 
 
 
(183)
(170)
(174)
Net investment income
 
 
 
 
 
 
 
 
28 
13 
(3)
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
(1)
(6)
(9)
Interest expense
 
 
 
 
 
 
 
 
217 
217 
211 
Other (income) expense
 
 
 
 
 
 
 
 
 
 
22 
(Gains) losses from fair value changes in separate account assets
 
 
 
 
 
 
 
 
   
   
 
Other
 
 
 
 
 
 
 
 
19 
15 
 
Income tax expense (benefit)
 
 
 
 
 
 
 
 
(136)
(137)
(154)
Net income (loss)
 
 
 
 
 
 
 
 
$ (256)
$ (258)
$ (265)
Segment Information (Net Premiums Earned For Segment By Product) (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Property & All Other
 
 
 
 
 
 
 
 
$ 5,973 
$ 5,712 
$ 3,898 
Casualty
 
 
 
 
 
 
 
 
5,292 
5,340 
5,752 
Life, Accident & Health
 
 
 
 
 
 
 
 
4,412 
4,335 
3,854 
Net premiums earned
3,848 
4,665 
3,783 
3,381 
3,831 
4,490 
3,757 
3,309 
15,677 
15,387 
13,504 
Insurance - North American
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Property & All Other
 
 
 
 
 
 
 
 
3,242 
3,174 
1,578 
Casualty
 
 
 
 
 
 
 
 
3,406 
3,380 
3,777 
Life, Accident & Health
 
 
 
 
 
 
 
 
371 
357 
296 
Net premiums earned
 
 
 
 
 
 
 
 
7,019 
6,911 
5,651 
Insurance - Overseas General
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Property & All Other
 
 
 
 
 
 
 
 
2,236 
2,080 
1,800 
Casualty
 
 
 
 
 
 
 
 
1,379 
1,415 
1,424 
Life, Accident & Health
 
 
 
 
 
 
 
 
2,125 
2,119 
1,929 
Net premiums earned
 
 
 
 
 
 
 
 
5,740 
5,614 
5,153 
Global Reinsurance
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Property & All Other
 
 
 
 
 
 
 
 
495 
458 
520 
Casualty
 
 
 
 
 
 
 
 
507 
545 
551 
Life, Accident & Health
 
 
 
 
 
 
 
 
   
   
0 
Net premiums earned
 
 
 
 
 
 
 
 
1,002 
1,003 
1,071 
Life
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Property & All Other
 
 
 
 
 
 
 
 
   
   
   
Casualty
 
 
 
 
 
 
 
 
   
   
0 
Life, Accident & Health
 
 
 
 
 
 
 
 
1,916 
1,859 
1,629 
Net premiums earned
 
 
 
 
 
 
 
 
$ 1,916 
$ 1,859 
$ 1,629 
Segment Information (Net Premiums Earned By Geographic Region) (Details)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Segment Reporting Information [Line Items]
 
 
 
Net Premiums Earned by Geographic Region
Years Ended 
 
 
North America
 
 
 
Segment Reporting Information [Line Items]
 
 
 
Percentage of net premiums earned by geographic region
60.00% 
61.00% 
61.00% 
Europe
 
 
 
Segment Reporting Information [Line Items]
 
 
 
Percentage of net premiums earned by geographic region
17.00% 
18.00% 
20.00% 
Asia Pacific / Far East
 
 
 
Segment Reporting Information [Line Items]
 
 
 
Percentage of net premiums earned by geographic region
16.00% 
14.00% 
13.00% 
Latin America
 
 
 
Segment Reporting Information [Line Items]
 
 
 
Percentage of net premiums earned by geographic region
7.00% 
7.00% 
6.00% 
Earnings Per Share (Detail) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Earnings Per Share [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
$ 765 
$ 640 
$ 328 
$ 973 
$ 735 
$ (39)
$ 594 
$ 250 
$ 2,706 
$ 1,540 
$ 3,085 
Weighted-average shares outstanding
 
 
 
 
 
 
 
 
339,843,438 
338,159,409 
339,685,143 
Share-based compensation plans
 
 
 
 
 
 
 
 
2,903,512 
2,620,815 
1,561,244 
Adjusted weighted-average shares outstanding and assumed conversions
 
 
 
 
 
 
 
 
342,746,950 
340,780,224 
341,246,387 
Basic earnings per share (US$ per share)
$ 2.24 
$ 1.88 
$ 0.96 
$ 2.87 
$ 2.17 
$ (0.11)
$ 1.75 
$ 0.74 
$ 7.96 
$ 4.55 
$ 9.08 
Diluted earnings per share (US$ per share)
$ 2.22 
$ 1.86 
$ 0.96 
$ 2.84 
$ 2.15 
$ (0.11)
$ 1.74 
$ 0.73 
$ 7.89 
$ 4.52 
$ 9.04 
Potential anti-dilutive share conversions
 
 
 
 
 
 
 
 
896,591 
111,326 
256,868 
Related party transaction (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Related Party Transactions [Abstract]
 
 
ACE Foundation - Bermuda-Loan
$ 27 
$ 29 
Statutory Financial Information (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Statutory Accounting Practices [Line Items]
 
 
 
Approximate increase in statutory capital and surplus resulting from discount of certain A&E liabilities
$ 161 
$ 192 
 
U.S. Subsidiairies
 
 
 
Statutory Accounting Practices [Line Items]
 
 
 
Dividends available to be paid
762 
 
 
Statutory capital and surplus
6,037 
5,858 
 
Statutory net income
619 
702 
1,025 
Other International Subsidiaries
 
 
 
Statutory Accounting Practices [Line Items]
 
 
 
Dividends available to be paid
2,100 
 
 
Statutory capital and surplus
18,317 
15,565 
 
Statutory net income
$ 2,118 
$ 1,214 
$ 2,592 
Information provided in connection with outstanding debt of subsidiaries (Condensed Consolidating Balance Sheet) (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Condensed Financial Statements, Captions [Line Items]
 
 
 
 
Investments
$ 60,264 
$ 55,676 
 
 
Cash
615 1 2
614 
772 3 4
669 3
Insurance and reinsurance balances receivable
4,147 
4,387 
 
 
Reinsurance recoverable on losses and loss expenses
12,078 
12,389 
 
 
Reinsurance recoverable on policy benefits
241 
249 
 
 
Value of business acquired
614 
676 
 
 
Goodwill and other intangible assets
4,975 
4,799 
 
 
Investments in subsidiaries
   
   
 
 
Due from subsidiaries and affiliates, net
   
   
 
 
Other assets
9,611 
8,531 
 
 
Total assets
92,545 
87,321 
 
 
Unpaid losses and loss expenses
37,946 
37,477 
37,391 
37,783 
Unearned premiums
6,864 
6,334 
 
 
Future policy benefits
4,470 
4,274 
 
 
Due to subsidiaries and affiliates, net
   
   
 
 
Short-term debt
1,401 
1,251 
 
 
Long-term debt
3,360 
3,360 
 
 
Trust preferred securities
309 
309 
 
 
Other liabilities
10,664 
9,984 
 
 
Total liabilities
65,014 
62,989 
 
 
Total shareholders' equity
27,531 
24,332 
22,835 
 
Total liabilities and shareholders' equity
92,545 
87,321 
 
 
ACE limited (Parent Gurantor)
 
 
 
 
Condensed Financial Statements, Captions [Line Items]
 
 
 
 
Investments
31 
33 
 
 
Cash
103 1 2
106 
308 4
(1)3
Insurance and reinsurance balances receivable
   
   
 
 
Reinsurance recoverable on losses and loss expenses
   
   
 
 
Reinsurance recoverable on policy benefits
   
   
 
 
Value of business acquired
   
   
 
 
Goodwill and other intangible assets
   
   
 
 
Investments in subsidiaries
27,251 
23,871 
 
 
Due from subsidiaries and affiliates, net
204 
498 
 
 
Other assets
13 
8 
 
 
Total assets
27,602 
24,516 
 
 
Unpaid losses and loss expenses
   
   
 
 
Unearned premiums
   
   
 
 
Future policy benefits
   
   
 
 
Due to subsidiaries and affiliates, net
   
   
 
 
Short-term debt
   
   
 
 
Long-term debt
   
   
 
 
Trust preferred securities
   
   
 
 
Other liabilities
71 
184 
 
 
Total liabilities
71 
184 
 
 
Total shareholders' equity
27,531 
24,332 
 
 
Total liabilities and shareholders' equity
27,602 
24,516 
 
 
ACE INA Holdings Inc. (Subsidiary Issuer)
 
 
 
 
Condensed Financial Statements, Captions [Line Items]
 
 
 
 
Investments
31,074 
28,848 
 
 
Cash
515 1 2
382 
573 4
400 3
Insurance and reinsurance balances receivable
3,654 
3,944 
 
 
Reinsurance recoverable on losses and loss expenses
17,232 
17,146 
 
 
Reinsurance recoverable on policy benefits
1,187 
941 
 
 
Value of business acquired
610 
676 
 
 
Goodwill and other intangible assets
4,419 
4,248 
 
 
Investments in subsidiaries
   
   
 
 
Due from subsidiaries and affiliates, net
   
   
 
 
Other assets
7,563 
7,018 
 
 
Total assets
66,254 
63,203 
 
 
Unpaid losses and loss expenses
31,356 
30,837 
 
 
Unearned premiums
5,872 
5,416 
 
 
Future policy benefits
3,876 
3,673 
 
 
Due to subsidiaries and affiliates, net
384 
316 
 
 
Short-term debt
851 
850 
 
 
Long-term debt
3,360 
3,360 
 
 
Trust preferred securities
309 
309 
 
 
Other liabilities
8,272 
7,769 
 
 
Total liabilities
54,280 
52,530 
 
 
Total shareholders' equity
11,974 
10,673 
 
 
Total liabilities and shareholders' equity
66,254 
63,203 
 
 
Other ACE Limited Subsidiaries and Eliminations
 
 
 
 
Condensed Financial Statements, Captions [Line Items]
 
 
 
 
Investments
29,159 5
26,795 5
 
 
Cash
(3)1 2 5
126 5
(109)4 5
270 3 5
Insurance and reinsurance balances receivable
493 5
443 5
 
 
Reinsurance recoverable on losses and loss expenses
(5,154)5
(4,757)5
 
 
Reinsurance recoverable on policy benefits
(946)5
(692)5
 
 
Value of business acquired
4 5
   5
 
 
Goodwill and other intangible assets
556 5
551 5
 
 
Investments in subsidiaries
   5
   5
 
 
Due from subsidiaries and affiliates, net
   5
   5
 
 
Other assets
2,035 5
1,505 5
 
 
Total assets
26,144 5
23,971 5
 
 
Unpaid losses and loss expenses
6,590 5
6,640 5
 
 
Unearned premiums
992 5
918 5
 
 
Future policy benefits
594 5
601 5
 
 
Due to subsidiaries and affiliates, net
(180)5
182 5
 
 
Short-term debt
550 5
401 5
 
 
Long-term debt
   5
   5
 
 
Trust preferred securities
   5
   5
 
 
Other liabilities
2,321 5
2,031 5
 
 
Total liabilities
10,867 5
10,773 5
 
 
Total shareholders' equity
15,277 5
13,198 5
 
 
Total liabilities and shareholders' equity
26,144 5
23,971 5
 
 
Consolidating Adjustments
 
 
 
 
Condensed Financial Statements, Captions [Line Items]
 
 
 
 
Investments
   6
   6
 
 
Cash
   1 2 6 7
   6 7
0 4 7
   3
Insurance and reinsurance balances receivable
   6
   6
 
 
Reinsurance recoverable on losses and loss expenses
   6
   6
 
 
Reinsurance recoverable on policy benefits
   6
   6
 
 
Value of business acquired
   6
   6
 
 
Goodwill and other intangible assets
   6
   6
 
 
Investments in subsidiaries
(27,251)6
(23,871)6
 
 
Due from subsidiaries and affiliates, net
(204)6
(498)6
 
 
Other assets
   6
   6
 
 
Total assets
(27,455)6
(24,369)6
 
 
Unpaid losses and loss expenses
   6
   6
 
 
Unearned premiums
   6
   6
 
 
Future policy benefits
   6
   6
 
 
Due to subsidiaries and affiliates, net
(204)6
(498)6
 
 
Short-term debt
   6
   6
 
 
Long-term debt
   6
   6
 
 
Trust preferred securities
   6
   6
 
 
Other liabilities
   6
   6
 
 
Total liabilities
(204)6
(498)6
 
 
Total shareholders' equity
(27,251)6
(23,871)6
 
 
Total liabilities and shareholders' equity
$ (27,455)6
$ (24,369)6
 
 
Information provided in connection with outstanding debt of subsidiaries (Condensed Consolidating Statement Of Operations and Comprehensive Income) (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
$ 16,075 
$ 15,372 
$ 13,708 
Net premiums earned
3,848 
4,665 
3,783 
3,381 
3,831 
4,490 
3,757 
3,309 
15,677 
15,387 
13,504 
Net investment income
567 
533 
537 
544 
565 
564 
569 
544 
2,181 
2,242 
2,070 
Equity in earnings of subsidiaries
 
 
 
 
 
 
 
 
   
   
   
Net realized gains (losses) including OTTI
272 
(60)
(394)
260 
83 
(760)
(73)
(45)
78 
(795)
432 
Losses and loss expenses
2,683 
3,047 
2,119 
1,804 
2,286 
2,745 
2,226 
2,263 
9,653 
9,520 
7,579 
Policy benefits
142 
130 
102 
147 
119 
83 
108 
91 
521 
401 
357 
Policy acquisition costs and administrative expenses
 
 
 
 
 
 
 
 
4,542 
4,540 
4,218 
Interest (income) expense
 
 
 
 
 
 
 
 
250 
250 
224 
Other (income) expense
 
 
 
 
 
 
 
 
(6)
81 
(10)
Income tax expense
 
 
 
 
 
 
 
 
270 
502 
553 
Net income (loss)
765 
640 
328 
973 
735 
(39)
594 
250 
2,706 
1,540 
3,085 
Comprehensive income
 
 
 
 
 
 
 
 
3,682 
1,857 
3,856 
ACE limited (Parent Gurantor)
 
 
 
 
 
 
 
 
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
   
   
   
Net premiums earned
 
 
 
 
 
 
 
 
   
   
   
Net investment income
 
 
 
 
 
 
 
 
1 
2 
1 
Equity in earnings of subsidiaries
 
 
 
 
 
 
 
 
2,590 
1,459 
3,043 
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
17 
(4)
(42)
Losses and loss expenses
 
 
 
 
 
 
 
 
   
   
   
Policy benefits
 
 
 
 
 
 
 
 
   
   
   
Policy acquisition costs and administrative expenses
 
 
 
 
 
 
 
 
62 
69 
70 
Interest (income) expense
 
 
 
 
 
 
 
 
(33)
(37)
(37)
Other (income) expense
 
 
 
 
 
 
 
 
(137)
(125)
(123)
Income tax expense
 
 
 
 
 
 
 
 
10 
10 
7 
Net income (loss)
 
 
 
 
 
 
 
 
2,706 
1,540 
3,085 
Comprehensive income
 
 
 
 
 
 
 
 
3,682 
1,857 
3,856 
ACE INA Holdings Inc. (Subsidiary Issuer)
 
 
 
 
 
 
 
 
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
 
 
8,195 
Net premiums earned
 
 
 
 
 
 
 
 
 
 
7,940 
Net investment income
 
 
 
 
 
 
 
 
 
 
1,011 
Equity in earnings of subsidiaries
 
 
 
 
 
 
 
 
 
 
   
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
 
 
303 
Losses and loss expenses
 
 
 
 
 
 
 
 
 
 
4,910 
Policy benefits
 
 
 
 
 
 
 
 
 
 
148 
Policy acquisition costs and administrative expenses
 
 
 
 
 
 
 
 
 
 
2,395 
Interest (income) expense
 
 
 
 
 
 
 
 
 
 
251 
Other (income) expense
 
 
 
 
 
 
 
 
 
 
101 
Income tax expense
 
 
 
 
 
 
 
 
 
 
441 
Net income (loss)
 
 
 
 
 
 
 
 
 
 
1,008 
Comprehensive income
 
 
 
 
 
 
 
 
 
 
1,271 
Other ACE Limited Subsidiaries and Eliminations
 
 
 
 
 
 
 
 
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
 
 
5,513 1
Net premiums earned
 
 
 
 
 
 
 
 
 
 
5,564 1
Net investment income
 
 
 
 
 
 
 
 
 
 
1,058 1
Equity in earnings of subsidiaries
 
 
 
 
 
 
 
 
 
 
   1
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
 
 
171 1
Losses and loss expenses
 
 
 
 
 
 
 
 
 
 
2,669 1
Policy benefits
 
 
 
 
 
 
 
 
 
 
209 1
Policy acquisition costs and administrative expenses
 
 
 
 
 
 
 
 
 
 
1,753 1
Interest (income) expense
 
 
 
 
 
 
 
 
 
 
10 1
Other (income) expense
 
 
 
 
 
 
 
 
 
 
12 1
Income tax expense
 
 
 
 
 
 
 
 
 
 
105 1
Net income (loss)
 
 
 
 
 
 
 
 
 
 
2,035 1
Comprehensive income
 
 
 
 
 
 
 
 
 
 
1,772 1
Consolidating Adjustments
 
 
 
 
 
 
 
 
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
   2
   2
   2
Net premiums earned
 
 
 
 
 
 
 
 
   2
   2
   2
Net investment income
 
 
 
 
 
 
 
 
   2
   2
   2
Equity in earnings of subsidiaries
 
 
 
 
 
 
 
 
(2,590)2
(1,459)2
(3,043)2
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
   2
   2
   2
Losses and loss expenses
 
 
 
 
 
 
 
 
   2
   2
   2
Policy benefits
 
 
 
 
 
 
 
 
   2
   2
   2
Policy acquisition costs and administrative expenses
 
 
 
 
 
 
 
 
   2
   2
   2
Interest (income) expense
 
 
 
 
 
 
 
 
   2
   2
   2
Other (income) expense
 
 
 
 
 
 
 
 
   2
   2
   2
Income tax expense
 
 
 
 
 
 
 
 
   2
   2
   2
Net income (loss)
 
 
 
 
 
 
 
 
(2,590)2
(1,459)2
(3,043)2
Comprehensive income
 
 
 
 
 
 
 
 
(2,590)2
(1,459)2
(3,043)2
ACE INA Holdings Inc. (Subsidiary Issuer)
 
 
 
 
 
 
 
 
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
9,466 
9,081 
 
Net premiums earned
 
 
 
 
 
 
 
 
9,194 
9,082 
 
Net investment income
 
 
 
 
 
 
 
 
1,048 
1,096 
 
Equity in earnings of subsidiaries
 
 
 
 
 
 
 
 
   
   
 
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
121 
62 
 
Losses and loss expenses
 
 
 
 
 
 
 
 
6,211 
5,889 
 
Policy benefits
 
 
 
 
 
 
 
 
309 
192 
 
Policy acquisition costs and administrative expenses
 
 
 
 
 
 
 
 
2,564 
2,561 
 
Interest (income) expense
 
 
 
 
 
 
 
 
257 
267 
 
Other (income) expense
 
 
 
 
 
 
 
 
77 
143 
 
Income tax expense
 
 
 
 
 
 
 
 
193 
418 
 
Net income (loss)
 
 
 
 
 
 
 
 
752 
770 
 
Comprehensive income
 
 
 
 
 
 
 
 
1,209 
1,077 
 
Other ACE Limited Subsidiaries and Eliminations
 
 
 
 
 
 
 
 
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
6,609 1
6,291 1
 
Net premiums earned
 
 
 
 
 
 
 
 
6,483 1
6,305 1
 
Net investment income
 
 
 
 
 
 
 
 
1,132 1
1,144 1
 
Equity in earnings of subsidiaries
 
 
 
 
 
 
 
 
   1
   1
 
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
(60)1
(853)1
 
Losses and loss expenses
 
 
 
 
 
 
 
 
3,442 1
3,631 1
 
Policy benefits
 
 
 
 
 
 
 
 
212 1
209 1
 
Policy acquisition costs and administrative expenses
 
 
 
 
 
 
 
 
1,916 1
1,910 1
 
Interest (income) expense
 
 
 
 
 
 
 
 
26 1
20 1
 
Other (income) expense
 
 
 
 
 
 
 
 
54 1
63 1
 
Income tax expense
 
 
 
 
 
 
 
 
67 1
74 1
 
Net income (loss)
 
 
 
 
 
 
 
 
1,838 1
689 1
 
Comprehensive income
 
 
 
 
 
 
 
 
$ 1,381 1
$ 382 1
 
Information provided in connection with outstanding debt of subsidiaries (Condensed Consolidating Statement Of Cash Flows) (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
Net cash flows from operating activities
$ 3,995 
$ 3,470 
$ 3,546 
Purchases of fixed maturities available for sale
(23,844)
(24,578)
(31,256)
Purchases of fixed maturities held to maturity
(388)
(340)
(616)
Purchases of equity securities
(135)
(309)
(794)
Sales of fixed maturities available for sale
14,769 
17,971 
24,279 
Sales of equity securities
119 
376 
774 
Maturities and redemptions of fixed maturities available for sale
5,523 
3,720 
3,660 
Maturities and redemptions of fixed maturities held to maturity
1,451 
1,279 
1,353 
Net derivative instruments settlements
(281)
(67)
(109)
Advances from (to) affiliates
   
   
   
Acquisition of subsidiaries (net of cash acquired of $8, $91 and $80)
(98)
(606)
(1,139)
Capital contribution to subsidiary
   
   
   
Other
(555)
(482)
(333)
Net cash flows from (used for) investing activities
(3,439)
(3,036)
(4,181)
Dividends paid on Common Shares
(815)
(459)
(435)
Common Shares repurchased
(11)
(195)
(235)
Net proceeds from (repayments) issuance of short-term debt
150 
(50)
1,141 
Net proceeds from issuances of long-term debt
 
 
199 
Proceeds from share-based compensation plans
126 
139 
62 
Advances from (to) affiliates
   
   
   
Capital contribution from subsidiary
   
 
 
Dividends to parent company
   
   
   
Cash contributions from parent
 
   
   
Net cash flows from (used for) financing activities
(550)
(565)
732 
Effect of foreign currency rate changes on cash and cash equivalents
(5)
(27)
6 
Net increase (decrease) in cash
1 
(158)
103 
Cash - beginning of period
614 
772 1 2
669 1
Cash - end of period
615 3 4
614 
772 1 2
ACE limited (Parent Gurantor)
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
Net cash flows from operating activities
781 
762 
(176)
Purchases of fixed maturities available for sale
   
   
(1)
Purchases of fixed maturities held to maturity
   
   
   
Purchases of equity securities
   
   
   
Sales of fixed maturities available for sale
   
9 
   
Sales of equity securities
   
   
   
Maturities and redemptions of fixed maturities available for sale
   
   
   
Maturities and redemptions of fixed maturities held to maturity
   
   
   
Net derivative instruments settlements
(1)
(3)
(3)
Advances from (to) affiliates
(2)
41 
851 
Acquisition of subsidiaries (net of cash acquired of $8, $91 and $80)
   
   
   
Capital contribution to subsidiary
   
(385)
(290)
Other
   
   
   
Net cash flows from (used for) investing activities
(3)
(338)
557 
Dividends paid on Common Shares
(815)
(459)
(435)
Common Shares repurchased
   
   
   
Net proceeds from (repayments) issuance of short-term debt
   
(300)
300 
Net proceeds from issuances of long-term debt
 
 
0 
Proceeds from share-based compensation plans
34 
133 
63 
Advances from (to) affiliates
   
   
   
Capital contribution from subsidiary
   
 
 
Dividends to parent company
   
   
   
Cash contributions from parent
 
   
   
Net cash flows from (used for) financing activities
(781)
(626)
(72)
Effect of foreign currency rate changes on cash and cash equivalents
   
   
   
Net increase (decrease) in cash
(3)
(202)
309 
Cash - beginning of period
106 
308 2
(1)1
Cash - end of period
103 3 4
106 
308 2
ACE INA Holdings Inc. (Subsidiary Issuer)
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
Net cash flows from operating activities
1,744 
1,053 
1,798 
Purchases of fixed maturities available for sale
(11,843)
(12,203)
(13,785)
Purchases of fixed maturities held to maturity
(384)
(338)
(615)
Purchases of equity securities
(70)
(157)
(107)
Sales of fixed maturities available for sale
7,347 
9,718 
10,225 
Sales of equity securities
59 
354 
17 
Maturities and redemptions of fixed maturities available for sale
2,759 
1,784 
1,845 
Maturities and redemptions of fixed maturities held to maturity
1,045 
933 
1,142 
Net derivative instruments settlements
(6)
(24)
(10)
Advances from (to) affiliates
   
   
   
Acquisition of subsidiaries (net of cash acquired of $8, $91 and $80)
(111)
(569)
(1,139)
Capital contribution to subsidiary
   
   
   
Other
(395)
(420)
(253)
Net cash flows from (used for) investing activities
(1,599)
(922)
(2,680)
Dividends paid on Common Shares
   
   
   
Common Shares repurchased
   
   
   
Net proceeds from (repayments) issuance of short-term debt
1 
(150)
841 
Net proceeds from issuances of long-term debt
 
 
199 
Proceeds from share-based compensation plans
13 
3 
0 
Advances from (to) affiliates
(105)
(149)
3 
Capital contribution from subsidiary
90 
 
 
Dividends to parent company
0 
0 
   
Cash contributions from parent
 
   
   
Net cash flows from (used for) financing activities
(1)
(296)
1,043 
Effect of foreign currency rate changes on cash and cash equivalents
(11)
(26)
12 
Net increase (decrease) in cash
133 
(191)
173 
Cash - beginning of period
382 
573 2
400 1
Cash - end of period
515 3 4
382 
573 2
Other ACE Limited Subsidiaries and Eliminations
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
Net cash flows from operating activities
1,920 5
2,395 5
2,124 5
Purchases of fixed maturities available for sale
(12,001)5
(12,375)5
(17,470)5
Purchases of fixed maturities held to maturity
(4)5
(2)5
(1)5
Purchases of equity securities
(65)5
(152)5
(687)5
Sales of fixed maturities available for sale
7,422 5
8,244 5
14,054 5
Sales of equity securities
60 5
22 5
757 5
Maturities and redemptions of fixed maturities available for sale
2,764 5
1,936 5
1,815 5
Maturities and redemptions of fixed maturities held to maturity
406 5
346 5
211 5
Net derivative instruments settlements
(274)5
(40)5
(96)5
Advances from (to) affiliates
   5
   5
   5
Acquisition of subsidiaries (net of cash acquired of $8, $91 and $80)
13 5
(37)5
   5
Capital contribution to subsidiary
(90)5
   5
   5
Other
(160)5
(62)5
(80)5
Net cash flows from (used for) investing activities
(1,929)5
(2,120)5
(1,497)
Dividends paid on Common Shares
   5
   5
   5
Common Shares repurchased
(11)5
(195)5
(235)5
Net proceeds from (repayments) issuance of short-term debt
149 5
400 5
   5
Net proceeds from issuances of long-term debt
 
 
0 
Proceeds from share-based compensation plans
79 5
3 5
(1)
Advances from (to) affiliates
107 5
108 5
(854)5
Capital contribution from subsidiary
   5
 
 
Dividends to parent company
(450)5
(740)5
(200)5
Cash contributions from parent
 
385 5
290 5
Net cash flows from (used for) financing activities
(126)5
(39)5
(1,000)
Effect of foreign currency rate changes on cash and cash equivalents
6 5
(1)5
(6)5
Net increase (decrease) in cash
(129)5
235 5
(379)
Cash - beginning of period
126 5
(109)2 5
270 1 5
Cash - end of period
(3)3 4 5
126 5
(109)2 5
Consolidating Adjustments
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
Net cash flows from operating activities
(450)6
(740)6
(200)1
Purchases of fixed maturities available for sale
   6
   6
   1
Purchases of fixed maturities held to maturity
   6
   6
   1
Purchases of equity securities
   6
   6
   1
Sales of fixed maturities available for sale
   6
   6
   1
Sales of equity securities
   6
   6
   1
Maturities and redemptions of fixed maturities available for sale
   6
   6
   1
Maturities and redemptions of fixed maturities held to maturity
   6
   6
   1
Net derivative instruments settlements
   6
   6
   1
Advances from (to) affiliates
2 6
(41)6
(851)1
Acquisition of subsidiaries (net of cash acquired of $8, $91 and $80)
   6
   6
   1
Capital contribution to subsidiary
90 6
385 6
290 1
Other
   6
   6
   1
Net cash flows from (used for) investing activities
92 6
344 6
(561)
Dividends paid on Common Shares
   6
   6
   1
Common Shares repurchased
   6
   6
   1
Net proceeds from (repayments) issuance of short-term debt
   6
   6
   1
Net proceeds from issuances of long-term debt
 
 
0 
Proceeds from share-based compensation plans
   6
 
0 
Advances from (to) affiliates
(2)6
41 6
851 1
Capital contribution from subsidiary
(90)6
 
 
Dividends to parent company
450 6
740 6
200 1
Cash contributions from parent
 
(385)6
(290)1
Net cash flows from (used for) financing activities
358 6
396 6
761 
Effect of foreign currency rate changes on cash and cash equivalents
   6
   6
   1
Net increase (decrease) in cash
   6
   6
0 
Cash - beginning of period
   6 7
0 2 6
   1
Cash - end of period
    3 4 6 7
    6 7
$ 0 2 6
Condensed Unaudited Quarterly Financial Data (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Quarterly Financial Information Disclosure [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Net premiums earned
$ 3,848 
$ 4,665 
$ 3,783 
$ 3,381 
$ 3,831 
$ 4,490 
$ 3,757 
$ 3,309 
$ 15,677 
$ 15,387 
$ 13,504 
Net investment income
567 
533 
537 
544 
565 
564 
569 
544 
2,181 
2,242 
2,070 
Net realized gains (losses) including OTTI
272 
(60)
(394)
260 
83 
(760)
(73)
(45)
78 
(795)
432 
Total revenues
4,687 
5,138 
3,926 
4,185 
4,479 
4,294 
4,253 
3,808 
17,936 
16,834 
16,006 
Losses and loss expenses
2,683 
3,047 
2,119 
1,804 
2,286 
2,745 
2,226 
2,263 
9,653 
9,520 
7,579 
Policy benefits
142 
130 
102 
147 
119 
83 
108 
91 
521 
401 
357 
Net income (loss)
$ 765 
$ 640 
$ 328 
$ 973 
$ 735 
$ (39)
$ 594 
$ 250 
$ 2,706 
$ 1,540 
$ 3,085 
Basic earnings per share (US$ per share)
$ 2.24 
$ 1.88 
$ 0.96 
$ 2.87 
$ 2.17 
$ (0.11)
$ 1.75 
$ 0.74 
$ 7.96 
$ 4.55 
$ 9.08 
Diluted earnings per share (US$ per share)
$ 2.22 
$ 1.86 
$ 0.96 
$ 2.84 
$ 2.15 
$ (0.11)
$ 1.74 
$ 0.73 
$ 7.89 
$ 4.52 
$ 9.04 
Schedule I (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
 
Cost or Amortized Cost
$ 57,336 
Fair Value
60,627 
Amount at Which Shown in the Balance Sheet
60,264 
Fixed maturities available for sale
 
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
 
Cost or Amortized Cost
44,666 
Fair Value
47,306 
Amount at Which Shown in the Balance Sheet
47,306 
Fixed maturities available for sale |
U.S. Treasury and agency
 
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
 
Cost or Amortized Cost
3,553 
Fair Value
3,735 
Amount at Which Shown in the Balance Sheet
3,735 
Fixed maturities available for sale |
Foreign
 
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
 
Cost or Amortized Cost
13,016 
Fair Value
13,713 
Amount at Which Shown in the Balance Sheet
13,713 
Fixed maturities available for sale |
Corporate securities
 
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
 
Cost or Amortized Cost
15,529 
Fair Value
16,708 
Amount at Which Shown in the Balance Sheet
16,708 
Fixed maturities available for sale |
Mortgage backed-securities
 
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
 
Cost or Amortized Cost
10,051 
Fair Value
10,473 
Amount at Which Shown in the Balance Sheet
10,473 
Fixed maturities available for sale |
States, municipalities, and political subdivisions
 
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
 
Cost or Amortized Cost
2,517 
Fair Value
2,677 
Amount at Which Shown in the Balance Sheet
2,677 
Fixed maturities held to maturity
 
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
 
Cost or Amortized Cost
7,270 
Fair Value
7,633 
Amount at Which Shown in the Balance Sheet
7,270 
Fixed maturities held to maturity |
U.S. Treasury and agency
 
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
 
Cost or Amortized Cost
1,044 
Fair Value
1,083 
Amount at Which Shown in the Balance Sheet
1,044 
Fixed maturities held to maturity |
Foreign
 
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
 
Cost or Amortized Cost
910 
Fair Value
964 
Amount at Which Shown in the Balance Sheet
910 
Fixed maturities held to maturity |
Corporate securities
 
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
 
Cost or Amortized Cost
2,133 
Fair Value
2,275 
Amount at Which Shown in the Balance Sheet
2,133 
Fixed maturities held to maturity |
Mortgage backed-securities
 
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
 
Cost or Amortized Cost
2,028 
Fair Value
2,116 
Amount at Which Shown in the Balance Sheet
2,028 
Fixed maturities held to maturity |
States, municipalities, and political subdivisions
 
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
 
Cost or Amortized Cost
1,155 
Fair Value
1,195 
Amount at Which Shown in the Balance Sheet
1,155 
Industrial, miscellaneous, and all others
 
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
 
Cost or Amortized Cost
707 
Fair Value
744 
Amount at Which Shown in the Balance Sheet
744 
Short-term investments
 
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
 
Cost or Amortized Cost
2,228 
Fair Value
2,228 
Amount at Which Shown in the Balance Sheet
2,228 
Other investments
 
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
 
Cost or Amortized Cost
2,465 
Fair Value
2,716 
Amount at Which Shown in the Balance Sheet
2,716 
Short-term investments and Other investments, total
 
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
 
Cost or Amortized Cost
4,693 
Fair Value
4,944 
Amount at Which Shown in the Balance Sheet
$ 4,944 
Schedule II (BALANCE SHEETS - Parent Company Only) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Assets
 
 
 
 
Investments in subsidiaries and affiliates on equity basis
   
   
 
 
Short-term investments
2,228 
2,301 
 
 
Other investments
2,716 
2,314 
 
 
Cash
615 1 2
614 
772 3 4
669 3
Due from subsidiaries and affiliates, net
   
   
 
 
Other assets
2,871 
2,495 
 
 
Total assets
92,545 
87,321 
 
 
Liabilities
 
 
 
 
Accounts payable, accrued expenses, and other liabilities
5,377 
4,898 
 
 
Short-term debt
1,401 
1,251 
 
 
Total liabilities
65,014 
62,989 
 
 
Stockholders' Equity Attributable to Parent [Abstract]
 
 
 
 
Common Shares
9,591 
10,095 
 
 
Common Shares in treasury
(159)
(327)
 
 
Additional paid-in capital
5,179 
5,326 
 
 
Retained earnings
10,033 
7,327 
 
 
Accumulated other comprehensive income
2,887 
1,911 
 
 
Total liabilities and shareholders' equity
92,545 
87,321 
 
 
Parent Company Only
 
 
 
 
Assets
 
 
 
 
Investments in subsidiaries and affiliates on equity basis
27,251 
23,871 
 
 
Short-term investments
1 
1 
 
 
Other investments
30 
32 
 
 
Total investments
27,282 
23,904 
 
 
Cash
103 1 2
106 
308 4
(1)3
Due from subsidiaries and affiliates, net
204 
498 
 
 
Other assets
13 
8 
 
 
Total assets
27,602 
24,516 
 
 
Liabilities
 
 
 
 
Accounts payable, accrued expenses, and other liabilities
71 
65 
 
 
Dividends payable
0 
119 
 
 
Short-term debt
   
   
 
 
Total liabilities
71 
184 
 
 
Stockholders' Equity Attributable to Parent [Abstract]
 
 
 
 
Common Shares
9,591 
10,095 
 
 
Common Shares in treasury
(159)
(327)
 
 
Additional paid-in capital
5,179 
5,326 
 
 
Retained earnings
10,033 
7,327 
 
 
Accumulated other comprehensive income
2,887 
1,911 
 
 
Total shareholders' equity
27,531 
24,332 
 
 
Total liabilities and shareholders' equity
$ 27,602 
$ 24,516 
 
 
Schedule II Schedule II (STATEMENTS OF OPERATIONS - Parent Company Only) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Condensed Financial Statements, Captions [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net realized (gains) losses
$ 272 
$ (60)
$ (394)
$ 260 
$ 83 
$ (760)
$ (73)
$ (45)
$ 78 
$ (795)
$ 432 
Total revenues
4,687 
5,138 
3,926 
4,185 
4,479 
4,294 
4,253 
3,808 
17,936 
16,834 
16,006 
Administrative and other (income) expense
 
 
 
 
 
 
 
 
(2,096)
(2,068)
(1,873)
Income tax expense (benefit)
 
 
 
 
 
 
 
 
270 
502 
553 
Total expenses
 
 
 
 
 
 
 
 
(14,960)
(14,792)
(12,368)
Net income (loss)
765 
640 
328 
973 
735 
(39)
594 
250 
2,706 
1,540 
3,085 
Comprehensive Income (Loss), Net of Tax, Including Portion Attributable to Noncontrolling Interest
 
 
 
 
 
 
 
 
3,682 
1,857 
3,856 
Parent Company Only
 
 
 
 
 
 
 
 
 
 
 
Condensed Financial Statements, Captions [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Investment income, including intercompany interest income
 
 
 
 
 
 
 
 
34 
39 
38 
Equity in net income of subsidiaries and affiliates
 
 
 
 
 
 
 
 
2,590 
1,459 
3,043 
Net realized (gains) losses
 
 
 
 
 
 
 
 
17 
(4)
(42)
Total revenues
 
 
 
 
 
 
 
 
2,641 
1,494 
3,039 
Administrative and other (income) expense
 
 
 
 
 
 
 
 
(75)
(56)
(53)
Income tax expense (benefit)
 
 
 
 
 
 
 
 
10 
10 
7 
Total expenses
 
 
 
 
 
 
 
 
(65)
(46)
(46)
Net income (loss)
 
 
 
 
 
 
 
 
2,706 
1,540 
3,085 
Comprehensive Income (Loss), Net of Tax, Including Portion Attributable to Noncontrolling Interest
 
 
 
 
 
 
 
 
$ 3,682 
$ 1,857 
$ 3,856 
Schedule II (STATEMENTS OF CASH FLOWS - Parent Company Only) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Condensed Financial Statements, Captions [Line Items]
 
 
 
Net cash flows from operating activities
$ 3,995 
$ 3,470 
$ 3,546 
Purchases of fixed maturities available for sale
(23,455)
(23,823)
(29,985)
Sales of fixed maturities available for sale
14,321 
17,176 
23,096 
Net derivative instruments settlements
(281)
(67)
(109)
Advances (to) from affiliates
   
   
   
Other
555 
482 
333 
Net cash flows from (used for) investing activities
(3,439)
(3,036)
(4,181)
Dividends paid on Common Shares
(815)
(459)
(435)
Proceeds from share-based compensation plans
126 
139 
62 
Net cash flows from (used for) financing activities
(550)
(565)
732 
Net increase (decrease) in cash
1 
(158)
103 
Cash - beginning of period
614 
772 1 2
669 1
Cash - end of period
615 3 4
614 
772 1 2
Parent Company Only
 
 
 
Condensed Financial Statements, Captions [Line Items]
 
 
 
Net cash flows from operating activities
781 
762 
(176)
Purchases of fixed maturities available for sale
0 
0 
(1)
Sales of fixed maturities available for sale
0 
9 
0 
Net derivative instruments settlements
(1)
(3)
(3)
Capital contributions to subsidiaries
0 
(385)
(290)
Advances (to) from affiliates
(2)
41 
851 
Net cash flows from (used for) investing activities
(3)
(338)
557 
Dividends paid on Common Shares
(815)
(459)
(435)
Net proceeds from issuance (repayment) of short-term debt
0 
(300)
300 
Proceeds from share-based compensation plans
34 
133 
63 
Net cash flows from (used for) financing activities
(781)
(626)
(72)
Net increase (decrease) in cash
(3)
(202)
309 
Cash - beginning of period
106 
308 2
(1)1
Cash - end of period
$ 103 3 4
$ 106 
$ 308 2
Schedule IV (SUPPLEMENTAL INFORMATION CONCERNING REINSURANCE) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Supplemental Schedule of Reinsurance Premiums for Insurance Companies [Abstract]
 
 
 
Direct Amount
$ 17,802 
$ 17,534 
$ 15,780 
Ceded To Other Companies
5,427 
5,496 
5,792 
Assumed From Other Companies
3,302 
3,349 
3,516 
Net Amount
$ 15,677 
$ 15,387 
$ 13,504 
Percentage of Amount Assumed to Net
21.00% 
22.00% 
26.00% 
Schedule VI (SUPPLEMENTARY INFORMATION CONCERNING PROPERTY AND CASUALTY OPERATIONS) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Supplemental Information for Property, Casualty Insurance Underwriters [Abstract]
 
 
 
Deferred Policy Acquisition Costs
$ 1,757 
$ 1,512 
$ 1,435 
Net Reserves for Unpaid Losses
26,547 
25,875 
25,242 
Unearned Premiums
6,864 
6,334 
6,330 
Net Premiums Earned
14,764 
14,523 
12,893 
Net Investment Income
2,018 
2,107 
1,994 
Net Losses and Loss Expenses Incurred Related to Current Year
10,132 
10,076 
8,082 
Net Losses and Loss Expenses Incurred Related to Prior Year
(479)
(556)
(503)
Amortization of Deferred Policy Acquisition Costs
2,254 
2,291 
2,216 
Net Paid Losses and Loss Expenses
9,219 
8,866 
7,413 
Net Premiums Written
$ 15,107 
$ 14,455 
$ 13,075