ACE LTD, 10-K filed on 2/24/2012
Annual Report
Document And Entity Information (USD $)
In Billions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Feb. 10, 2012
Jun. 30, 2011
Document And Entity Information [Abstract]
 
 
 
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Dec. 31, 2011 
 
 
Entity Registration Name
ACE Ltd 
 
 
Entity Central Index Key
0000896159 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Document Fiscal Year Focus
2011 
 
 
Document Fiscal Period Focus
FY 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Common Stock, Shares Outstanding
 
337,153,475 
 
Entity well-known seasoned issuer
Yes 
 
 
Entity voluntary filers
No 
 
 
Entity current reporting status
Yes 
 
 
Entity Public Float
 
 
$ 22 
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Assets
 
 
Fixed maturities available for sale, at fair value (amortized cost - $40,450 and $36,542) (includes hybrid financial instruments of $357 and $416)
$ 41,967 
$ 37,539 
Fixed maturities held to maturity, at amortized cost (fair value - $8,605 and $9,461)
8,447 
9,501 
Equity securities, at fair value (cost - $671 and $666)
647 
692 
Short-term investments, at fair value and amortized cost
2,301 
1,983 
Other investments (cost - $2,112 and $1,511)
2,314 
1,692 
Total investments
55,676 
51,407 
Cash
614 
772 
Securities lending collateral
1,375 
1,495 
Accrued investment income
547 
521 
Insurance and reinsurance balances receivable
4,387 
4,233 
Reinsurance recoverable on losses and loss expenses
12,389 
12,871 
Reinsurance recoverable on policy benefits
249 
281 
Deferred policy acquisition costs
1,761 
1,641 
Value of business acquired
648 
634 
Goodwill and other intangible assets
4,831 
4,664 
Prepaid reinsurance premiums
1,541 
1,511 
Deferred tax assets
612 
769 
Investments in partially-owned insurance companies (cost - $373 and $357)
380 
360 
Other assets
2,495 
2,196 
Total assets
87,505 
83,355 
Liabilities
 
 
Unpaid losses and loss expenses
37,477 
37,391 
Unearned premiums
6,334 
6,330 
Future policy benefits
4,274 
3,106 
Insurance and reinsurance balances payable
3,542 
3,282 
Deposit liabilities
663 
421 
Securities lending payable
1,385 
1,518 
Payable for securities purchased
287 
292 
Accounts payable, accrued expenses, and other liabilities
3,948 
2,958 
Income taxes payable
159 
116 
Short-term debt
1,251 
1,300 
Long-term debt
3,360 
3,358 
Trust preferred securities
309 
309 
Total liabilities
62,989 
60,381 
Commitments and contingencies
   
   
Shareholders' equity
 
 
Common Shares (CHF 30.27 and CHF 30.57 par value, 342,832,412 and 341,094,559 shares issued, 336,927,276 and 334,942,852 shares outstanding)
10,095 
10,161 
Common Shares in treasury (5,905,136 and 6,151,707 shares)
(327)
(330)
Additional paid-in capital
5,326 
5,623 
Retained earnings
7,511 
5,926 
Deferred compensation obligation
 
Accumulated other comprehensive income (AOCI)
1,911 
1,594 
Common Shares issued to employee trust
 
(2)
Total shareholders' equity
24,516 
22,974 
Total liabilities and shareholders' equity
$ 87,505 
$ 83,355 
Consolidated Balance Sheets (Parenthetical)(USD ($))
In Millions, except Share data, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Consolidated Balance Sheets [Abstract]
 
 
Fixed maturities available for sale, at amortized cost
$ 40,450 
$ 36,542 
Fixed maturities available for sale, hybrid financial instruments
357 
416 
Fixed maturities held to maturity, at fair value
8,605 
9,461 
Equity securities, at cost
671 
666 
Other investments, cost
2,112 
1,511 
Investments in partially-owned insurance companies, cost
$ 373 
$ 357 
Common Shares, shares issued
342,832,412 
341,094,559 
Common Shares, shares outstanding
336,927,276 
334,942,852 
Common Shares in treasury, shares
5,905,136 
6,151,707 
Consolidated Statements Of Operations And Comprehensive Income (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Revenues
 
 
 
Net premiums written
$ 15,372 
$ 13,708 
$ 13,299 
Change in unearned premiums
15 
(204)
(59)
Net premiums earned
15,387 
13,504 
13,240 
Net investment income
2,242 
2,070 
2,031 
Net realized gains (losses):
 
 
 
Other-than-temporary impairment (OTTI) losses gross
(65)
(128)
(699)
Portion of OTTI losses recognized in other comprehensive income (OCI)
15 
69 
302 
Net OTTI losses recognized in income
(50)
(59)
(397)
Net realized gains (losses) excluding OTTI losses
(745)
491 
201 
Total net realized gains (losses)
(795)
432 
(196)
Total revenues
16,834 
16,006 
15,075 
Expenses
 
 
 
Losses and loss expenses
9,520 
7,579 
7,422 
Policy benefits
401 
357 
325 
Policy acquisition costs
2,447 
2,337 
2,130 
Administrative expenses
2,052 
1,858 
1,811 
Interest expense
250 
224 
225 
Other (income) expense
73 
(16)
85 
Total expenses
14,743 
12,339 
11,998 
Income before income tax
2,091 
3,667 
3,077 
Income tax expense
506 
559 
528 
Net income
1,585 
3,108 
2,549 
Other comprehensive income (loss)
 
 
 
Unrealized appreciation
646 
1,526 
2,712 
Reclassification adjustment for net realized (gains) losses included in net income
(173)
(632)
75 
Subtotal
473 
894 
2,787 
Change in:
 
 
 
Cumulative translation adjustment
(5)
(7)
568 
Pension liability
11 
(48)
Other comprehensive income, before income tax
476 
898 
3,307 
Income tax expense related to OCI items
(159)
(127)
(568)
Other comprehensive income
317 
771 
2,739 
Comprehensive income
$ 1,902 
$ 3,879 
$ 5,288 
Earnings per share
 
 
 
Basic earnings per share
$ 4.68 
$ 9.15 
$ 7.57 
Diluted earnings per share
$ 4.65 
$ 9.11 
$ 7.55 
Consolidated Statements Of Shareholders' Equity (USD $)
In Millions, unless otherwise specified
Common Shares [Member]
Common Shares In Treasury [Member]
Additional Paid-In Capital [Member]
Retained Earnings [Member]
Deferred Compensation Obligation [Member]
Net Unrealized Appreciation (Depreciation) On Investments [Member]
Cumulative Translation Adjustment [Member]
Pension Liability Adjustment [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Common Shares Issued To Employee Trust [Member]
Total
Balance - beginning of period at Dec. 31, 2008
$ 10,827 
$ (3)
$ 5,464 
$ 74 
$ 3 
$ (1,712)
$ (161)
$ (43)
 
$ (3)
 
Net shares issued (redeemed) under employee share-based compensation plans
73 
 
(77)
 
 
 
 
 
 
 
 
Exercise of stock options
 
10 
 
 
 
 
 
 
 
 
Dividends on Common Shares-par value reduction
(402)
 
 
 
 
 
 
 
 
 
 
Share-based compensation expense and other
 
 
121 
 
 
 
 
 
 
 
 
Tax (expense) benefit on share-based compensation expense
 
 
 
 
 
 
 
 
 
Effect of adoption of OTTI standard
 
 
 
195 
 
(242)
 
 
 
 
 
Net income
 
 
 
2,549 
 
 
 
 
 
 
2,549 
Decrease to obligation
 
 
 
 
(1)
 
 
 
 
 
 
Accumulated other comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
Change in year, net of income tax expense of $(157), $(152), and $(481)
 
 
 
 
 
2,611 
 
 
 
 
 
Change in year, net of income tax (expense) benefit of $1, $29, and $(167)
 
 
 
 
 
 
401 
 
 
 
 
Change in year, net of income tax (expense) benefit of $(3), $(4), and $17
 
 
 
 
 
 
 
(31)
 
 
 
Decrease in Common Shares
 
 
 
 
 
 
 
 
 
 
Balance - end of period at Dec. 31, 2009
10,503 
(3)
5,526 
2,818 
657 
240 
(74)
823 
(2)
19,667 
Net shares issued (redeemed) under employee share-based compensation plans
71 
 
(64)
 
 
 
 
 
 
 
 
Exercise of stock options
30 
 
23 
 
 
 
 
 
 
 
 
Common Shares repurchased
 
(303)
 
 
 
 
 
 
 
 
 
Dividends on Common Shares-par value reduction
(443)
 
 
 
 
 
 
 
 
 
 
Other 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)
 
 
 
 
 
 
 
(1)
Net income
 
 
 
3,108 
 
 
 
 
 
 
3,108 
Accumulated other comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
Change in year, net of income tax expense of $(157), $(152), and $(481)
 
 
 
 
 
742 
 
 
 
 
 
Change in year, net of income tax (expense) benefit of $1, $29, and $(167)
 
 
 
 
 
 
22 
 
 
 
 
Change in year, net of income tax (expense) benefit of $(3), $(4), and $17
 
 
 
 
 
 
 
 
 
 
Balance - end of period at Dec. 31, 2010
10,161 
(330)
5,623 
5,926 
1,399 
262 
(67)
1,594 
(2)
22,974 
Net shares issued (redeemed) under employee share-based compensation plans
 
 
(104)
 
 
 
 
 
 
 
 
Exercise of stock options
47 
 
16 
 
 
 
 
 
 
 
 
Common Shares repurchased
 
(132)
 
 
 
 
 
 
 
 
 
Dividends on Common Shares-par value reduction
(113)
 
 
 
 
 
 
 
 
 
 
Other 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
 
 
 
 
 
 
 
 
 
Funding of dividends to Retained earnings
 
 
(354)
 
 
 
 
 
 
 
 
Net income
 
 
 
1,585 
 
 
 
 
 
 
1,585 
Funding of dividends from Additional paid-in capital
 
 
 
354 
 
 
 
 
 
 
 
Dividends on Common Shares
 
 
 
(354)
 
 
 
 
 
 
 
Decrease to obligation
 
 
 
 
(2)
 
 
 
 
 
 
Accumulated other comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
Change in year, net of income tax expense of $(157), $(152), and $(481)
 
 
 
 
 
316 
 
 
 
 
 
Change in year, net of income tax (expense) benefit of $1, $29, and $(167)
 
 
 
 
 
 
(4)
 
 
 
 
Change in year, net of income tax (expense) benefit of $(3), $(4), and $17
 
 
 
 
 
 
 
 
 
 
Decrease in Common Shares
 
 
 
 
 
 
 
 
 
 
Balance - end of period at Dec. 31, 2011
$ 10,095 
$ (327)
$ 5,326 
$ 7,511 
 
$ 1,715 
$ 258 
$ (62)
$ 1,911 
 
$ 24,516 
Consolidated Statements Of Shareholders' Equity (Parenthetical) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Consolidated Statements Of Shareholders' Equity [Abstract]
 
 
 
Net unrealized appreciation (depreciation) on investments, Change in period, income tax (expense) benefit
$ (157)
$ (152)
$ (481)
Cumulative translation adjustment, Change in period, income tax (expense) benefit
29 
(167)
Pension liability adjustment, Change in period, income tax benefit (expense)
$ (3)
$ (4)
$ 17 
Consolidated Statements Of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Cash flows from operating activities
 
 
 
Net income
$ 1,585 
$ 3,108 
$ 2,549 
Adjustments to reconcile net income to net cash flows from operating activities
 
 
 
Net realized losses (gains)
795 
(432)
196 
Amortization of premiums/discounts on fixed maturities
152 
145 
53 
Deferred income taxes
19 
116 
(19)
Unpaid losses and loss expenses
43 
(360)
298 
Unearned premiums
262 
102 
Future policy benefits
78 
48 
67 
Insurance and reinsurance balances payable
216 
(172)
434 
Accounts payable, accrued expenses, and other liabilities
39 
130 
(206)
Income taxes payable
39 
10 
13 
Insurance and reinsurance balances receivable
(217)
50 
(119)
Reinsurance recoverable on losses and loss expenses
531 
626 
518 
Reinsurance recoverable on policy benefits
25 
49 
(51)
Deferred policy acquisition costs
(160)
(193)
(309)
Prepaid reinsurance premiums
(34)
(13)
24 
Other
350 
172 
(215)
Net cash flows from operating activities
3,470 
3,546 
3,335 
Cash flows from investing activities
 
 
 
Purchases of fixed maturities available for sale
(23,823)
(29,985)
(31,789)
Purchases of to be announced mortgage-backed securities
(755)
(1,271)
(5,471)
Purchases of fixed maturities held to maturity
(340)
(616)
(472)
Purchases of equity securities
(309)
(794)
(354)
Sales of fixed maturities available for sale
17,176 
23,096 
23,693 
Sales of to be announced mortgage-backed securities
795 
1,183 
5,961 
Sales of fixed maturities held to maturity
 
 
11 
Sales of equity securities
376 
774 
1,272 
Maturities and redemptions of fixed maturities available for sale
3,720 
3,660 
3,404 
Maturities and redemptions of fixed maturities held to maturity
1,279 
1,353 
514 
Net derivative instruments settlements
(67)
(109)
(92)
Acquisition of subsidiaries (net of cash acquired of $91 in 2011 and $80 in 2010)
(606)
(1,139)
 
Other
(482)
(333)
99 
Net cash flows used for investing activities
(3,036)
(4,181)
(3,224)
Cash flows from financing activities
 
 
 
Dividends paid on Common Shares
(459)
(435)
(388)
Common Shares repurchased
(195)
(235)
 
Proceeds from issuance of short-term debt
5,238 
1,300 
 
Repayment of short-term debt
(5,288)
(159)
(466)
Proceeds from issuance of long-term debt
 
699 
500 
Repayment of long-term debt
 
(500)
 
Proceeds from share-based compensation plans
133 
63 
25 
Tax benefit (expense) on share-based compensation expense
(1)
Net cash flows (used for) from financing activities
(565)
732 
(321)
Effect of foreign currency rate changes on cash and cash equivalents
(27)
12 
Net (decrease) increase in cash
(158)
103 
(198)
Cash - beginning of year
772 
669 
867 
Cash - end of year
614 
772 
669 
Supplemental cash flow information
 
 
 
Taxes paid
460 
434 
538 
Interest paid
$ 234 
$ 204 
$ 228 
Consolidated Statements Of Cash Flows (Parenthetical) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Consolidated Statements Of Cash Flows [Abstract]
 
 
Acquisition of subsidiaries, cash acquired
$ 91 
$ 80 
Summary Of Significant Accounting Policies
Summary Of Significant Accounting Policies

1. 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.

 

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 and 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 underwriting and other costs that vary with, and are primarily related to, the production of premium. 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. Policy acquisition costs on P&C contracts are generally amortized ratably over the period in which premiums are earned. Policy acquisition costs on long duration contracts are amortized over the estimated life of the contracts, generally in proportion to premium revenue recognized. 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, principally related to A&H business produced by the Insurance – Overseas General segment, which are deferred and recognized over the expected future benefit period. 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 and amortized over five years, 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 was $236 million and $253 million at December 31, 2011 and 2010, respectively. The amortization expense for deferred marketing costs was $128 million, $115 million, and $103 million for the years ended December 31, 2011, 2010, and 2009, 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 obtain reinsurance status for accounting purposes, 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 25 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 $35 million and $92 million at December 31, 2011 and 2010, 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 maturity investments 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 its 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 it earns 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 $350 million in the aggregate). Our revolving 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 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 $59 million net of discount held at December 31, 2011, representing structured settlements for which the timing and amount of future claim payments are reliably determinable, ACE does not discount its P&C loss reserves. 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, 2011, the gross liability for the amount due to claimants was $644 million and reinsurance recoverables for amounts due from the life insurance companies was $585 million. For structured settlement contracts where payments are guaranteed regardless of claimant life expectancy, the amounts recoverable from the life insurance companies are included in Other assets, as they do not meet the requirements for reinsurance accounting. At December 31, 2011, there was $59 million included in Other assets in the consolidated balance sheets relating to structured settlements.

 

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. Commencing with the quarter ended September 30, 2009, prior period development for the crop business includes adjustments to both crop losses and loss expenses and the related crop profit share commission.

 

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 and 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 one percent to six percent and one percent to seven percent at December 31, 2011 and 2010, 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 have assets that do not qualify for separate account reporting under GAAP (failed separate accounts). The assets related to failed separate accounts are 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 failed separate account assets are reported in Other income (expense) and the offsetting movements in the failed separate account 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 fees 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 ceded 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 $133 million and $144 million at December 31, 2011 and 2010, 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 $318 million and $351 million and contract holder deposit funds of $345 million and $70 million at December 31, 2011 and 2010, respectively. 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 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 $21 million, $85 million, and $26 million for the years ended December 31, 2011, 2010, and 2009, 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 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 2011 and 2010, 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 2011, 2010, or 2009.

 

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 2011

Testing goodwill for impairment

In September 2011, the Financial Accounting Standards Board (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.

 

Adopted in 2012

Accounting for costs associated with acquiring or renewing insurance contracts

In October 2010, the FASB issued new guidance related to the accounting for costs associated with acquiring or renewing insurance contracts. The guidance modifies the definition of acquisition costs 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. Additionally, this new guidance will require that direct-response advertising costs be accounted for as deferred acquisition costs for measurement and subsequent accounting. This guidance is effective for interim and annual reporting periods beginning on January 1, 2012. We adopted this guidance retrospectively effective January 1, 2012 and we will therefore adjust previously issued financial statements that are presented as comparative financial statements in future filings beginning with our March 31, 2012 Form 10-Q. Upon adoption in 2012, we recorded a decrease in Retained earnings of approximately $188 million as of December 31, 2011. We anticipate that the new standard will result in an immaterial decrease to Net income for the year ended December 31, 2012, principally in our Life segment.

 

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. This guidance is effective for interim and annual reporting periods beginning on or after December 15, 2011. This guidance, which became effective for ACE on January 1, 2012, changed disclosure only and did not impact our financial condition or results of operations.

Acquisitions
Acquisitions

2. Acquisitions

 

ACE 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 $425 million in cash. These acquired businesses, now operating under our Life segment, expand our presence in the North Asia market and complement our life insurance business established in that region. These acquisitions generated approximately $121 million of goodwill, none of which is expected to be deductible for income tax purposes, and approximately $130 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, is a well-established underwriter in the agribusiness market since 1887 and currently operates in 34 states. PMHC operates under 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. Rio Guayas sells a range of insurance products, including auto, life, property, and A&H. The acquisition of Rio Guayas will expand our capabilities in terms of geography, products, and distribution. Rio Guayas operates under our Insurance – Overseas General segment.

 

Prior year acquisitions

On December 28, 2010, ACE acquired all the outstanding common stock of Rain and Hail not previously owned by ACE 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 ACE's strategy to expand its specialty lines business and provides further diversification of ACE's global product mix.

 

Prior to the consummation of this business combination, ACE's 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, ACE was deemed to have disposed of its 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, ACE 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 ACE 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 consolidated financial statements include the results of Rain and Hail from December 28, 2010.

 

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 ACE's 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, ACE 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.

Investments
Investments

3. Investments

 

a) Transfers of securities

As part of our fixed income diversification strategy, we hold certain securities to maturity. Because we have the intent to hold these securities to maturity, we transferred securities with a total fair value of $6.8 billion during 2010 from Fixed maturities available for sale to Fixed maturities held to maturity in the consolidated balance sheet. The net unrealized appreciation at the date of the transfer continues to be reported as a component of AOCI and is being amortized over the remaining life of the securities as an adjustment of yield in a manner consistent with the amortization of any premium or discount. There were no transfers in 2011.

 

b) Fixed maturities

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

 

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, 2011 and 2010, $48 million of net unrealized depreciation and $193 million of net unrealized appreciation, respectively, related to such securities is included in OCI. At December 31, 2011 and 2010, AOCI includes net unrealized depreciation of $155 million and $99 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 84 percent and 79 percent of the total mortgage-backed securities at December 31, 2011 and December 31, 2010, 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 the amortized cost and fair value of fixed maturities by contractual maturity:

 

   

December 31

2011

       

December 31

2010

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

Available for sale

                                           

Due in 1 year or less

  $ 2,321         $ 2,349         $ 1,846         $ 1,985  

Due after 1 year through 5 years

    12,325           12,722           13,094           13,444  

Due after 5 years through 10 years

    12,379           12,995           10,276           10,782  

Due after 10 years

    3,446           3,700           2,818           2,812  
      30,471           31,766           28,034           29,023  

Mortgage-backed securities

    9,979           10,201           8,508           8,516  
    $ 40,450         $ 41,967         $ 36,542         $ 37,539  

Held to maturity

                                           

Due in 1 year or less

  $ 393         $ 396         $ 400         $ 404  

Due after 1 year through 5 years

    2,062           2,090           1,983           2,010  

Due after 5 years through 10 years

    2,376           2,399           2,613           2,524  

Due after 10 years

    667           684           694           677  
      5,498           5,569           5,690           5,615  

Mortgage-backed securities

    2,949           3,036           3,811           3,846  
    $ 8,447         $ 8,605         $ 9,501         $ 9,461  

 

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.

 

c) Equity securities

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

 

(in millions of U.S. dollars)

 

December 31

2011

       

December 31

2010

 

Cost

  $ 671         $ 666  

Gross unrealized appreciation

    18           28  

Gross unrealized depreciation

    (42         (2

Fair value

  $ 647         $ 692  

 

d) Net realized gains (losses)

In accordance with guidance related to the recognition and presentation of OTTI adopted on April 1, 2009, 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 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 $15 million of gross unrealized loss at December 31, 2011. 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

    4.8%            1.1%   

B

    12.8%            3.4%   

Caa-C

    53.5%            13.9%   

 

Consistent with management's approach to developing default rate assumptions considering recent market conditions, ACE assumed a 25 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 41 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 for the years ended December 31, 2011 and 2010 of $9 million and $14 million, respectively. Credit losses recognized in net income for corporate securities from April 1, 2009 (the date of adoption) to December 31, 2009, were $59 million.

 

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; and

 

• lower loss severity for older vintage securities versus more recent vintage securities, which reflects the decline in underwriting standards through 2007.

 

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.

 

The following table presents the significant assumptions used to estimate future cash flows for specific mortgage-backed securities evaluated for potential credit loss by sector and vintage:

 

Application of the methodology and assumptions described above resulted in credit losses recognized in net income for mortgage-backed securities for the years ended December 31, 2011 and 2010, of $11 million and $32 million, respectively. Credit losses recognized in net income for mortgage-backed securities from April 1, 2009 (the date of adoption) to December 31, 2009, were $56 million.

 

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) on investments:

 

    Years Ended December 31  

(in millions of U.S. dollars)

  2011         2010         2009  

Fixed maturities:

                               

OTTI on fixed maturities, gross

  $ (61       $ (115       $ (536

OTTI on fixed maturities recognized in OCI (pre-tax)

    15           69           302  

OTTI on fixed maturities, net

    (46         (46         (234

Gross realized gains excluding OTTI

    410           569           591  

Gross realized losses excluding OTTI

    (200         (143         (398

Total fixed maturities

    164           380           (41

Equity securities:

                               

OTTI on equity securities

    (1                    (26

Gross realized gains excluding OTTI

    15           86           105  

Gross realized losses excluding OTTI

    (5         (2         (224

Total equity securities

    9           84           (145

OTTI on other investments

    (3         (13         (137

Foreign exchange losses

    (13         (54         (21

Investment and embedded derivative instruments

    (143         58           68  

Fair value adjustments on insurance derivative

    (779         (28         368  

S&P put options and futures

    (4         (150         (363

Other derivative instruments

    (4         (19         (93

Other

    (22         174           168  

Net realized gains (losses)

    (795         432           (196

Change in net unrealized appreciation (depreciation) on investments:

                               

Fixed maturities available for sale

    569           451           2,723  

Fixed maturities held to maturity

    (89         522           (6

Equity securities

    (47         (44         213  

Other

    40           (35         162  

Income tax expense

    (157         (152         (481

Change in net unrealized appreciation on investments

    316           742           2,611  

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

  $ (479       $ 1,174         $ 2,415  

 

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        

Nine Months Ended
December 31

2009

 
(in millions of U.S. dollars)   2011         2010        

Balance of credit losses related to securities still held-beginning of period

  $ 137         $ 174         $ 130  

Additions where no OTTI was previously recorded

    12           34           104  

Additions where an OTTI was previously recorded

    8           12           11  

Reductions reflecting amounts previously recorded in OCI but subsequently reflected in net income

                          (2

Reductions for securities sold during the period

    (83         (83         (69

Balance of credit losses related to securities still held-end of period

  $ 74         $ 137         $ 174  

 

e) Other investments

The following table presents the fair value and cost of other investments:

 

   

December 31

2011

        

December 31

2010

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

Investment funds

  $ 378         $ 277         $ 329         $ 232  

Limited partnerships

    531           429           438           356  

Partially-owned investment companies

    904           904           688           688  

Life insurance policies

    127           127           118           118  

Policy loans

    143           143           54           54  

Trading securities

    194           195           37           35  

Other

    37           37           28           28  

Total

  $ 2,314         $ 2,112         $ 1,692         $ 1,511  

 

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 59 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 $162 million of mutual funds related to failed separate accounts acquired in 2011. Trading securities also include $24 million of equity securities, and $8 million of fixed maturities in rabbi trusts at December 31, 2011, compared with $28 million of equity securities and $9 million of fixed maturities in rabbi trusts at December 31, 2010. In addition, rabbi trusts also include life insurance policies. Refer to Note 11 f) for additional information.

 

f) Investments in partially-owned insurance companies

The following table presents Investments in partially-owned insurance companies:

 

   

December 31

2011

       

December 31

2010

           

(in millions of U.S. dollars, except percentages)

 

Carrying

Value

        Issued Share
Capital
        Ownership
Percentage
       

Carrying

Value

        Issued Share
Capital
        Ownership
Percentage
        Domicile  

Freisenbruch-Meyer

  $ 8         $ 5           40.0%          $ 8         $ 5           40.0%            Bermuda   

ACE Cooperative Ins. Co. – Saudi Arabia

    7           27           30.0%            7           27           30.0%            Saudi Arabia   

Huatai Insurance Company

    241           457           20.0%            229           207           21.3%            China   

Huatai Life Insurance Company

    118           196           20.0%            112           179           20.0%            China   

Russian Reinsurance Company

    2           4           23.3%                                             Russia   

Island Heritage

    4           27           10.8%            4           27           10.8%            Cayman Islands   

Total

  $ 380         $ 716                     $ 360         $ 445                          

 

Huatai Insurance Company and Huatai Life Insurance Company are China-based entities which provide a range of P&C, life, and investment products.

 

g) Gross unrealized loss

At December 31, 2011, there were 3,873 fixed maturities out of a total of 22,198 fixed maturities in an unrealized loss position. The largest single unrealized loss in the fixed maturities was $9 million. There were approximately 77 equity securities out of a total of 179 equity securities in an unrealized loss position. The largest single unrealized loss in the equity securities was $32 million. Fixed maturities in an unrealized loss position at December 31, 2011 comprised both investment grade and below investment grade securities for which fair value declined primarily due to widening credit spreads since the date of purchase. Equity securities in an unrealized loss position include foreign fixed income securities held in a commingled fund structure for which fair value declined primarily due to widening credit spreads since the date of purchase.

 

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:

 

h) Net investment income

The following table presents the sources of net investment income:

 

    Years Ended December 31  

(in millions of U.S. dollars)

  2011          2010         2009  

Fixed maturities

  $ 2,196         $ 2,071         $ 1,985  

Short-term investments

    43           34           38  

Equity securities

    36           26           54  

Other

    62           44           48  

Gross investment income

    2,337           2,175           2,125  

Investment expenses

    (95         (105         (94

Net investment income

  $ 2,242         $ 2,070         $ 2,031  

 

i) 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 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, 2011 and 2010, are fixed maturities and short-term investments totaling $14.9 billion and $13.0 billion, respectively, and cash of $179 million and $104 million, respectively.

 

The following table presents the components of restricted assets:

Fair Value Measurements
Fair Value Measurements

4. Fair value measurements

 

a) Fair value hierarchy

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

 

The three levels of the hierarchy are as follows:

 

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

 

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

 

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

 

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

 

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

 

Fixed maturities

We use pricing services to estimate fair value measurements for the majority of our fixed maturities. The pricing services use market quotations for fixed maturities that have quoted prices in active markets; such securities are classified within Level 1. For fixed maturities other than U.S. Treasury securities that generally do not trade on a daily basis, the pricing services prepare estimates of fair value measurements using their pricing applications, which include available relevant market information, benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. Additional valuation factors that can be taken into account are nominal spreads, dollar basis, and liquidity adjustments. The pricing services evaluate each asset class based on relevant market and credit information, perceived market movements, and sector news. The market inputs used in the pricing evaluation, listed in the approximate order of priority include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and industry and economic events. The extent of the use of each input is dependent on the asset class and the market conditions. Given the asset class, the priority of the use of inputs may change or some market inputs may not be relevant. Additionally, the valuation of fixed maturity investments 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 non-public equity securities, 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 investment 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. The underlying assets within failed separate accounts, as described in Note 1 i), comprise mutual funds classified within Level 1 in the valuation hierarchy on the same basis as other equity securities traded in active markets. Equity securities and fixed maturities held in rabbi trusts maintained by ACE for deferred compensation plans, and included in Other investments, 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 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 on 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. 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 GMDB and 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 on 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 GMIB and 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 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 no currently observable relevant annuitization 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 2011, no changes were made to actuarial or behavioral assumptions. We made minor technical refinements to the model with a favorable net income impact of approximately $14 million and $98 million for the years ended December 31, 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:

 

 

 

 

 

There were no significant gross transfers between Level 1 and Level 2 during the year ended December 31, 2010.

 

Fair value of alternative investments

Included in Other investments in the fair value hierarchy at December 31, 2011 and 2010 are investment funds, limited partnerships, and partially-owned investment companies measured at fair value using NAV as a practical expedient. At December 31, 2011 and 2010, 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

2011

       

December 31

2010

 

(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          $ 205         $ 141         $ 192         $ 151  

Real estate

    3 to 9 Years            270           96           163           92  

Distressed

    6 to 9 Years            182           57           243           43  

Mezzanine

    6 to 9 Years            195           282           125           173  

Traditional

    3 to 8 Years            565           200           376           291  

Vintage

    1 to 3 Years            18           1           27           3  

Investment funds

    Not Applicable            378                      329             
                $ 1,813         $ 777         $ 1,455         $ 753  

 

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 following tables present a reconciliation of the beginning and ending balances of financial instruments measured at fair value using significant unobservable inputs (Level 3):

 

 

 

 

c) Financial instruments disclosed, but not carried, 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

2011

 

December 31

2010

 
(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

  $ 1,078         $ 1,126         $ 1,105         $ 1,127  

Foreign

    935           930           1,049           1,013  

Corporate securities

    2,338           2,337           2,361           2,313  

Mortgage-backed securities

    2,949           3,036           3,811           3,846  

States, municipalities, and political subdivisions

    1,147           1,176           1,175           1,162  

Total fixed maturities held to maturity

    8,447           8,605           9,501           9,461  

Liabilities:

                                           

Short-term debt

    1,251           1,251           1,300           1,300  

Long-term debt

    3,360           3,823           3,358           3,690  

Trust preferred securities

    309           404           309           364  

Total liabilities

  $ 4,920         $ 5,478         $ 4,967         $ 5,354  
Reinsurance
Reinsurance

5. 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)   2011         2010         2009  

Premiums written

                               

Direct

  $ 17,626          $ 15,887         $ 15,467  

Assumed

    3,205            3,624           3,697  

Ceded

    (5,459         (5,803         (5,865

Net

  $ 15,372         $ 13,708         $ 13,299  

Premiums earned

                               

Direct

  $ 17,534         $ 15,780         $ 15,415  

Assumed

    3,349           3,516           3,768  

Ceded

    (5,496         (5,792         (5,943

Net

  $ 15,387         $ 13,504         $ 13,240  

 

For the years ended December 31, 2011, 2010, and 2009, reinsurance recoveries on losses and loss expenses incurred were $3.3 billion, $3.3 billion, and $3.7 billion, respectively.

 

b) Reinsurance recoverable on ceded reinsurance

 

The following table presents the composition of reinsurance recoverable on losses and loss expenses:

 

(in millions of U.S. dollars)

 

December 31

2011

       

December 31

2010

 

Reinsurance recoverable on unpaid losses and loss expenses, net of a provision for uncollectible reinsurance

  $ 11,602         $ 12,149  

Reinsurance recoverable on paid losses and loss expenses, net of a provision for uncollectible reinsurance

    787           722  

Net reinsurance recoverable on losses and loss expenses

  $ 12,389         $ 12,871  

 

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, 2011 and 2010, we recorded a provision for uncollectible reinsurance of $479 million and $530 million, respectively.

 

The following tables present a listing, at December 31, 2011, 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. Other 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)    2011          Provision          % of
Gross
 

Categories

                                  

Largest reinsurers

   $ 6,230          $ 109            1.7%   

Other reinsurers balances rated A- or better

     3,109            57            1.8%   

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

     667            108            16.2%   

Other pools and government agencies

     122            8            6.6%   

Structured settlements

     585            22            3.8%   

Other captives

     1,842            37            2.0%   

Other

     313            138            44.1%   

Total

   $ 12,868          $ 479            3.7%   

 

Largest Reinsurers

         

Berkshire Hathaway Insurance Group

   Munich Re Group    Swiss Re Group

Everest Re Group

   National Workers Compensation    Transatlantic Holdings

HDI Re Group (Hanover Re)

  

Reinsurance Pool

   XL Capital Group

Lloyd's of London

   Partner Re     

 

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)

  2011         2010         2009  

GMDB

                               

Net premiums earned

  $ 98         $ 109         $ 104  

Policy benefits and other reserve adjustments

  $ 59         $ 99         $ 111  

GLB

                               

Net premiums earned

  $ 163         $ 164         $ 159  

Policy benefits and other reserve adjustments

    47           29           20  

Net realized gains (losses)

    (812         (64         368  

(Loss) gain recognized in income

  $ (696       $ 71         $ 507  

Net cash received

  $ 161         $ 160         $ 156  

Net (increase) decrease in liability

  $ (857       $ (89       $ 351  

 

At December 31, 2011, reported liabilities for GMDB and GLB reinsurance were $138 million and $1.5 billion, respectively, compared with $185 million and $648 million, respectively, at December 31, 2010. The reported liability for GLB reinsurance of $1.5 billion at December 31, 2011, and $648 million at December 31, 2010, includes a fair value derivative adjustment of $1.3 billion and $507 million, 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, 2011 and 2010, the net amount at risk from reinsurance programs covering the GMDB risk only was $1.8 billion in both years.

 

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, 2011 and 2010, respectively);

 

• there are no lapses or withdrawals;

 

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

 

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

 

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

 

The total claim amount payable on reinsurance programs covering the GMDB risk only, if all the cedants' policyholders were to die immediately at December 31, 2011 was approximately $400 million. This takes into account all applicable reinsurance treaty claim limits.

 

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

 

(ii) Reinsurance covering the GLB risk only

At December 31, 2011 and 2010, the net amount at risk from reinsurance programs covering the GLB risk only was $380 million and $30 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, 2011 and 2010, 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 3.0 and 4.0 percent; and

 

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

 

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

 

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

 

At December 31, 2011 and 2010, the GMDB net amount at risk from reinsurance programs covering both the GMDB and GLB risks on the same underlying policyholders was $182 million and $145 million, respectively.

 

At December 31, 2011 and 2010, the GLB net amount at risk from reinsurance programs covering both the GMDB and GLB risks on the same underlying policyholders was $998 million and $619 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, 2011 and 2010, 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 1.0 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 both the GMDB and GLB risks on the same underlying policyholders, if all of the cedants' policyholders were to die immediately at December 31, 2011 was approximately $1.1 billion. 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 treaty limits control the increase in the GMDB net amount at risk as equity markets fall. The GMDB net amount at risk continues to grow as equity markets fall because most of these reinsurance treaties do not have annual claim limits calculated as a percentage of the underlying account value.

 

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

 

The average attained age of all policyholders under sections a), b), and c) above, weighted by the guaranteed value of each reinsured policy, is approximately 67 years.

Intangible Assets
Intangible Assets

6. Intangible assets

 

Included in Goodwill and other intangible assets in the consolidated balance sheets at December 31, 2011, are goodwill of $4.2 billion and other intangible assets of $651 million.

 

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, 2009

  $ 1,205         $ 1,497         $ 365         $ 747         $ 3,814  

Acquisition of Rain and Hail

    135                                            135  

Acquisition of Jerneh

               94                                 94  

Purchase price allocation adjustment

                                     3           3  

Foreign exchange revaluation and other

    11           (27                               (16

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

                                     121           121  

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         $ 862         $ 4,180  

 

Included in the other intangible assets balance at December 31, 2011, are intangible assets subject to amortization of $558 million and intangible assets not subject to amortization of $93 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 capacity. Amortization expense related to other intangible assets amounted to $29 million, $9 million, and $11 million for the years ended December 31, 2011, 2010, and 2009, respectively. Amortization expense related to other intangible assets is estimated to be between approximately $31 million and $43 million for each of the next five fiscal years.

 

The following table presents a roll-forward of VOBA:

 

(in millions of U.S. dollars)   2011         2010         2009  

Balance, beginning of year

  $ 634         $ 748         $ 823  

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

    120                        

Amortization expense

    (105         (111         (130

Foreign exchange revaluation

    (1         (3         55  

Balance, end of year

  $ 648         $ 634         $ 748  

 

The following table presents the estimated amortization expense related to VOBA for the next five years:

 

For the Year Ending December 31

(in millions of U.S. dollars)

     

2012

  $ 96  

2013

    86  

2014

    77  

2015

    70  

2016

    65  

Total

  $ 394  
Unpaid Losses And Loss Expenses
Unpaid Losses And Loss Expenses
Taxation
Taxation

8. 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. 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, 2011, 2010, and 2009 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)

  2011         2010         2009  

Current tax expense

  $ 485          $ 443          $ 547   

Deferred tax expense (benefit)

    21            116            (19

Provision for income taxes

  $ 506          $ 559          $ 528   

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. 26.0 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)

  2011         2010         2009  

Expected tax provision at Swiss statutory tax rate

  $ 164         $ 287         $ 241  

Permanent differences:

                               

Taxes on earnings subject to rate other than Swiss statutory tax rate

    323           327           319  

Tax-exempt interest and dividends received deduction, net of proration

    (21         (20         (25

Net withholding taxes

    19           15           14  

Change in valuation allowance

    (2         (3         (48

Non-taxable acquisition gain

               (61           

Other

    23           14           27  

Total provision for income taxes

  $ 506         $ 559         $ 528  

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

 

(in millions of U.S. dollars)

 

December 31

2011

       

December 31

2010

 

Deferred tax assets:

                   

Loss reserve discount

  $ 933         $ 852  

Unearned premiums reserve

    85           87  

Foreign tax credits

    1,074           952  

Investments

    67           51  

Provision for uncollectible balances

    113           132  

Loss carry-forwards

    43           57  

Other, net

    31           114  

Cumulative translation adjustment

    5           2  

Total deferred tax assets

    2,351           2,247  

Deferred tax liabilities:

                   

Deferred policy acquisition costs

    107           100  

VOBA and other intangible assets

    373           367  

Un-remitted foreign earnings

    810           718  

Unrealized appreciation on investments

    392           262  

Total deferred tax liabilities

    1,682           1,447  

Valuation allowance

    57           31  

Net deferred tax assets

  $ 612         $ 769  

The valuation allowance of $57 million at December 31, 2011, and $31 million at December 31, 2010, 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, 2011, ACE has net operating loss carry-forwards of $172 million which, if unutilized, will expire in the years 2012-2031, and a foreign tax credit carry-forward in the amount of $42 million which, if unutilized, will expire in the years 2015-2019.

 

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

 

(in millions of U.S. dollars)

 

December 31

2011

       

December 31

2010

 

Balance, beginning of year

  $ 139         $ 155  

Additions based on tax positions related to the current year

    1           1  

Reductions for tax positions of prior years

    (6         (17

Balance, end of year

  $ 134         $ 139  

Included in the balance at December 31, 2011 and 2010, is $1 million 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, 2011, that would affect the effective tax rate, if recognized, is $133 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 and penalties reported in the consolidated statements of operations for the years ended December 31, 2011, 2010, and 2009 were $3 million, $(1) million, and $6 million, respectively. At December 31, 2011 and 2010, ACE recorded $22 million and $19 million, respectively, in liabilities for tax-related interest 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. Additionally, in June 2010, the IRS completed its field examination of ACE's federal tax returns for 2005, 2006, and 2007 and has proposed several adjustments principally involving transfer pricing and other insurance-related matters. In July 2010, we filed a written protest with the IRS, and the case is currently being reviewed by Appeals. ACE believes that it is reasonably likely that a settlement will be reached with Appeals on these tax years during 2012. The IRS commenced its field examination of ACE's federal tax returns for 2008 and 2009 during January 2011. 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 from the closing of tax statutes of limitations. In particular, the resolution of appeals and negotiations with taxing authorities cannot be predicted with reasonable precision in advance of final resolution although favorable settlements have been reached in prior periods. 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

9. Debt

 

Debt outstanding consisted of the following:

 

(in millions of U.S. dollars)

 

December 31

2011

       

December 31

2010

 

Short-term debt

                   

ACE Limited revolving credit facility

  $          $ 300  

Reverse repurchase agreements

    1,251           1,000  
    $ 1,251         $ 1,300  

Long-term debt

                   

ACE INA senior notes due 2014

  $ 500         $ 500  

ACE INA senior notes due 2015

    449           447  

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         $ 3,358  

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, 2011, there were $1.3 billion of reverse repurchase agreements outstanding with a weighted average interest rate of 0.32 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 limitation 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 limitation 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, as part of the financing of the Combined Insurance acquisition, 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.

 

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 limitation 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

10. 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, we purchase TBAs as part of our investing activities. These securities are included within the fixed maturities available for sale (FM AFS) portfolio.

 

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

 

In relation to certain debt issuances, ACE, from time to time, has entered 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, 2011, ACE had no in-force interest rate swaps, having exited such positions upon the repayment of related debt issuances during the fourth quarter of 2010.

 

ACE buys credit default swaps to mitigate global credit risk exposure, primarily related to reinsurance recoverables.

 

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:

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

 

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.

 

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, 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. We have purchased a credit default swap to mitigate our global credit risk exposure to one of our reinsurers.

 

(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 a TBA, we make a commitment to purchase a future issuance of mortgage-backed securities. For the period between purchase of the TBA 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 annuities. 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, 2011, were General Electric Company, JP Morgan Chase & Co., and Citigroup Inc. Our largest exposure by industry at December 31, 2011, 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 year ended December 31, 2011, approximately 12 percent of our gross premiums written were generated from or placed by Marsh, Inc. and its affiliates and 10 percent by Aon Corporation and its affiliates. Both of these entities are large, well established companies and there are no indications that either of them is financially troubled at December 31, 2011. No other broker and no one insured or reinsured accounted for more than ten percent of gross premiums written in the three years ended December 31, 2011, 2010, and 2009.

 

c) Other investments

At December 31, 2011, included in Other investments in the consolidated balance sheet are investments in limited partnerships and partially-owned investment companies with a carrying value of $1,435 million. In connection with these investments, we have commitments that may require funding of up to $777 million over the next several years.

 

d) Credit facilities

We have a $500 million unsecured revolving credit facility expiring in November 2012 available for general corporate purposes and the issuance of LOCs. Outstanding LOCs issued under this facility were $55 million at December 31, 2011. This facility requires that ACE Limited and/or certain of its subsidiaries continue to maintain certain covenants, including a minimum consolidated net worth covenant and a maximum leverage covenant, which have been met at December 31, 2011.

 

e) Letters of credit

We have a $1 billion unsecured operational LOC facility expiring in November 2012. At December 31, 2011, $948 million of this facility was utilized. We also have a $500 million unsecured operational LOC facility expiring in September 2014. At December 31, 2011, this facility was fully utilized.

 

To satisfy funding requirements of ACE's Lloyd's Syndicate 2488 through 2012, we have a series of four bilateral uncollateralized LOC facilities totaling $400 million. LOCs issued under these facilities will expire no earlier than December 2015. At December 31, 2011, $392 million of this facility was utilized.

 

These facilities require that ACE Limited and/or certain of its subsidiaries continue to maintain certain covenants, including a minimum consolidated net worth covenant and a maximum leverage covenant, which have been met at December 31, 2011.

 

f) 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 is not likely to have a material adverse effect on our consolidated financial condition, although it is possible that the effect could be material to our consolidated results of operations for an individual reporting period.

 

(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 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 indicated that it will issue a new scheduling order in the coming months. The Court has not yet finally approved the proposed class settlement, and has not yet indicated when it will finally resolve all issues such that the ACE defendants may re-file their motions to dismiss.

 

As of February 23, 2012, plaintiffs have not specified an amount of alleged damages and the Court has not decided defendants' renewed motions to dismiss. The Court has also not determined if this case may proceed as a class action and has, therefore, not determined the size or scope of any class. As a result, ACE is unable to reasonably estimate the potential loss or range of losses, if any, arising from this litigation.

 

There are a number of 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 and indicated that it will issue a new scheduling order in the coming months.

 

• 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.

 

• 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.

• 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.) 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.

 

• 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.

 

As of February 23, 2012, plaintiffs have not specified an amount of alleged damages in any of the 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 Multidistrict Litigation Court's decision on defendants' renewed 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 are two pending state cases 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 23, 2012, 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.

 

• State of Ohio, ex. rel. Marc E. Dann, Attorney General v. American Int'l Group, Inc. et al. (Case No. 07-633857; Court of Common Pleas in Cuyahoga County, Ohio) is an Ohio state action filed by the Ohio Attorney General on August 24, 2007. ACE INA Holdings Inc., ACE American Insurance Co., ACE Property & Casualty Insurance Co., Insurance Company of North America, and Westchester Fire Insurance Co., along with a number of other insurance companies and Marsh, are named. In December 2011 the ACE parties agreed to settle the case for $1.97 million. On December 27, 2011 the case was voluntarily dismissed with prejudice.

 

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.

 

ACE's ultimate liability for these matters is not likely to have a material adverse effect on ACE's consolidated financial condition, although it is possible that the effect could be material to ACE's consolidated results of operations for an individual reporting period.

 

g) 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 $114 million, $83 million, and $84 million for the years ended December 31, 2011, 2010, and 2009, 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)

     

2012

  $ 93  

2013

    72  

2014

    60  

2015

    54  

2016

    52  

Thereafter

    166  

Total minimum future lease commitments

  $ 497  
Shareholders' Equity
Shareholders' Equity

11. Shareholders' equity

 

a) Common Shares

All Common Shares of ACE are authorized under Swiss corporate law. Though the par value of Common Shares is stated in Swiss francs, we continue to use U.S. dollars as our 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 to be made by the end of April 2012. This proposed increase was approved by our shareholders at the January 9, 2012 Extraordinary General Meeting.

 

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  
    2011         2010         2009  

Shares issued, beginning of year

    341,094,559           337,841,616           335,413,501  

Shares issued, net

               2,268,000           2,000,000  

Exercise of stock options

    1,737,853           984,943           168,720  

Shares issued under ESPP

                          259,395  

Shares issued, end of year

    342,832,412           341,094,559           337,841,616  

Common Shares in treasury, end of year

    (5,905,136         (6,151,707         (1,316,959

Shares issued and outstanding, end of year

    336,927,276           334,942,852           336,524,657  

Common Shares issued to employee trust

                               

Balance, beginning of year

    (101,481         (101,481         (108,981

Shares redeemed

    92,014                      7,500  

Balance, end of year

    (9,467         (101,481         (101,481

 

Decreases in Common Shares in treasury are principally due to issuances of shares upon the exercise of employee stock options, 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 2011, and 2010, ACE repurchased 2,058,860 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 $132 million and $303 million for the years ended December 31, 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, 2011 and 2010, 5,905,136 and 6,151,707 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 19, 2012, 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. ACE is seeking shareholder approval at its 2012 annual general meeting for a new pool of authorized share capital for general purposes to replace the existing 140,000,000 share pool when it expires.

 

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 30.27 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 30.27 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 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. 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, 2011, $468 million in share repurchase authorization remained through December 31, 2012, pursuant to the November 2010 and August 2011 Board authorizations.

 

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. Dividend distributions on Common Shares amounted to CHF 1.22 ($1.38) per Common Share (including a par value reduction of CHF 0.30 per Common Share), CHF 1.31 ($1.30) per Common Share, and CHF 1.26 ($1.19) per Common Share for the years ended December 31, 2011, 2010, and 2009, 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, 2011, stands at CHF 30.27.

 

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

12. 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, 2011, a total of 9,411,758 shares remain available for future issuance under this plan.

 

Under the 2004 LTIP, 3,000,000 Common Shares are authorized to be issued under the ESPP. At December 31, 2011, a total of 189,297 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.

 

Share-based compensation expense for stock options and shares issued under the ESPP amounted to $27 million ($15 million after tax), $28 million ($21 million after tax), and $27 million ($11 million after tax) for the years ended December 31, 2011, 2010, and 2009, respectively. For the years ended December 31, 2011, 2010, and 2009, restricted stock expense was $112 million ($73 million after tax), $111 million ($79 million after tax), and $94 million ($75 million after tax), respectively. Unrecognized compensation expense related to the unvested portion of ACE's employee share-based awards was $120 million at December 31, 2011, 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 of 100 percent of 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, 2011, is a portion of the cost related to the 2008-2011 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 for the years indicated:

 

    Years Ended December 31  
    2011         2010         2009  

Dividend yield

    2.2%            2.5%            2.8%   

Expected volatility

    28.8%            30.3%            45.4%   

Risk-free interest rate

    2.3%            2.5%            2.2%   

Forfeiture rate

    6.5%            7.5%            7.5%   

Expected life

    5.4 years            5.4 years            5.4 years   

 

The following table presents a roll-forward of ACE's stock options:

 

   

Number of

Options

        Weighted-Average
Exercise Price
 

Options outstanding, December 31, 2008

    9,923,563         $ 46.24  

Granted

    2,339,036         $ 38.60  

Exercised

    (537,556       $ 27.71  

Forfeited

    (241,939       $ 50.48  

Options outstanding, December 31, 2009

    11,483,104         $ 45.46  

Granted

    2,094,227         $ 50.38  

Exercised

    (1,328,715       $ 40.11  

Forfeited

    (305,723       $ 49.77  

Options outstanding, December 31, 2010

    11,942,893         $ 46.80  

Granted

    1,649,824         $ 62.68  

Exercised

    (2,741,238       $ 44.45  

Forfeited

    (271,972       $ 51.33  

Options outstanding, December 31, 2011

    10,579,507         $ 49.78  

Options exercisable, December 31, 2011

    7,044,330         $ 47.80  

 

The weighted-average remaining contractual term was 6.1 years for the stock options outstanding and 4.7 years for the stock options exercisable at December 31, 2011. The total intrinsic value was $215 million for stock options outstanding and $157 million for stock options exercisable at December 31, 2011. The weighted-average fair value for the stock options granted for the years ended December 31, 2011, 2010, and 2009, was $14.67, $12.09, and $12.95, respectively. The total intrinsic value for stock options exercised during the years ended December 31, 2011, 2010, and 2009, was $63 million, $22 million, and $12 million, respectively.

 

The amount of cash received during the year ended December 31, 2011 from the exercise of stock options was $121 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, 2011, is a portion of the cost related to the restricted stock granted in the years 2007 – 2011.

 

The following table presents a roll-forward of our restricted stock. Included in the roll-forward below are 32,660 and 36,248 restricted stock awards that were granted to non-management directors during 2011 and 2010, respectively:

 

    Number of
Restricted Stock
        Weighted-Average
Grant-Date Fair
Value
 

Unvested restricted stock, December 31, 2008

    3,883,230         $ 57.01  

Granted

    2,603,344         $ 39.05  

Vested and issued

    (1,447,676       $ 54.85  

Forfeited

    (165,469       $ 51.45  

Unvested restricted stock, December 31, 2009

    4,873,429         $ 48.25  

Granted

    2,461,076         $ 51.09  

Vested and issued

    (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 and issued

    (1,929,189       $ 50.82  

Forfeited

    (333,798       $ 47.46  

Unvested restricted stock, December 31, 2011

    4,851,490         $ 52.20  

 

During the years ended December 31, 2011, 2010, and 2009, ACE awarded 261,214 restricted stock units, 326,091 restricted stock units, and 333,104 restricted stock units, respectively, to employees and officers of ACE and its subsidiaries each with a weighted-average grant date fair value of $62.85, $50.36, and $38.75, respectively. At December 31, 2011, the number of unvested restricted stock units was 656,837.

 

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, 2011, the number of deferred restricted stock units was 226,503.

 

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 2011, employees paid $11.8 million to purchase 205,812 shares.

Pension Plans
Pension Plans

13. 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 $96 million, $87 million, and $84 million for the years ended December 31, 2011, 2010, and 2009, respectively.

 

Defined benefit plans

We maintain non-contributory defined benefit plans that cover certain employees, principally located in Europe and Asia. We do not provide any such plans to U.S.-based employees. 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, 2011, the fair value of plan assets and the projected benefit obligation were $434 million and $508 million, respectively. The fair value of plan assets and the projected benefit obligation were $394 million and $487 million, respectively, at December 31, 2010. The accrued pension liability of $74 million at December 31, 2011, and $93 million at December 31, 2010, is included in Accounts payable, accrued expenses, and other liabilities in the consolidated balance sheets.

 

The defined benefit pension plan contribution for 2012 is expected to be $17 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 $2 million.

Benefit payments were $16 million and $15 million in 2011 and 2010, respectively. Expected future payments are as follows:

 

For the year ending December 31

(in millions of U.S. dollars)

     

2012

  $ 22  

2013

    23  

2014

    22  

2015

    24  

2016

    25  

2017-2021

    131  
Other (Income) Expense
Other (Income) Expense

14. Other (income) expense

 

The following table presents the components of Other (income) expense as reflected in the consolidated statements of operations:

 

Other (income) expense includes losses from separate account assets that do not qualify for separate account reporting under GAAP (failed separate accounts). The offsetting movement in the separate account liabilities is included in Policy benefits. 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

15. Segment information

 

ACE operates through the following business segments, certain of which represent the aggregation of distinct operating 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 the operations in the U.S., Canada, and Bermuda. This segment includes the operations of ACE USA (including ACE Canada), ACE Bermuda, ACE Commercial Risk Services, ACE Private Risk Services, ACE Westchester, ACE Agriculture, and various run-off operations. ACE USA is the North American retail operating division which provides a broad array of P&C, A&H, and risk management products and services to a diverse group of commercial and non-commercial enterprises and consumers. ACE Bermuda provides commercial insurance products on an excess basis mainly to a global client base targeting Fortune 1000 companies, covering exposures that are generally low in frequency and high in severity. ACE Commercial Risk Services addresses the insurance needs of small to 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 specializes in the North American wholesale distribution of excess and surplus P&C, environmental, professional and inland marine products. ACE Agriculture provides comprehensive Multi-Peril Crop Insurance and crop/hail insurance protection to customers throughout the U.S. and Canada through Rain and Hail and Agribusiness insurance through Penn Millers Insurance Company. The run-off operations include Brandywine, Commercial Insurance Services, residual market workers' compensation business, pools and syndicates not attributable to a single business group, and other exited lines of business. Run-off operations do not actively sell insurance products, but are responsible for the management of 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, and the international A&H and life 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 (D&O and E&O), marine, energy, aviation, political risk, specialty consumer-oriented products, and A&H (principally accident and supplemental health). ACE Global Markets, our London-based excess and surplus lines business, includes Lloyd's Syndicate 2488, offers products through its parallel distribution network via ACE European Group Limited (AEGL) and Lloyd's Syndicate 2488. ACE provides funds at Lloyd's to support underwriting by Syndicate 2488, which is managed by ACE Underwriting Agencies Limited. ACE Global Markets utilizes Syndicate 2488 to underwrite P&C business on a global basis through Lloyd's worldwide licenses. ACE Global Markets utilizes 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 ACE Global Markets is included in the Global Reinsurance segment. Combined Insurance distributes a wide range of supplemental accident and health 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. These divisions provide a broad range of property catastrophe, casualty, and property reinsurance coverages to a diverse array of primary P&C insurers. The Global Reinsurance segment also includes ACE Global Markets' reinsurance operations.

 

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, universal life and unit linked contracts through multiple distribution channels primarily in emerging markets, including Egypt, Indonesia, Taiwan, Thailand, Vietnam, the United Arab Emirates, throughout Latin America, selectively in Europe, as well as China through a partially-owned insurance company. ACE Life also includes the newly acquired business of New York Life's Korea operations and Hong Kong operations which expands our presence in the North Asia market and complements our life insurance business established in that region. 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 individual accident and supplemental health and life insurance products targeted to middle income consumers 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 separate account assets that do not qualify for separate account reporting as components of underwriting income. For the year ended December 31, 2011, Life underwriting income of $424 million includes net investment income of $224 million and Losses from separate account assets of $36 million.

 

The following tables present the operations by segment:

 

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

 

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

 

For the year ended December 31, 2011

(in millions of U.S. dollars)

 

Property &

All Other

        Casualty         Life, Accident &
Health
        ACE
Consolidated
 

Insurance – North American

  $ 3,174         $ 3,380         $ 357         $ 6,911  

Insurance – Overseas General

    2,080           1,415           2,242           5,737  

Global Reinsurance

    458           545                      1,003  

Life

                          1,736           1,736  
    $ 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           2,016           5,240  

Global Reinsurance

    520           551                      1,071  

Life

                          1,542           1,542  
    $ 3,898         $ 5,752         $ 3,854         $ 13,504  
For the year ended December 31, 2009                                    

Insurance – North American

  $ 1,690         $ 3,734         $ 260         $ 5,684  

Insurance – Overseas General

    1,787           1,420           1,940           5,147  

Global Reinsurance

    546           433                      979  

Life

                          1,430           1,430  
    $ 4,023         $ 5,587         $ 3,630         $ 13,240  

 

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

 

Year ended   North America         Europe         Asia
Pacific/Far East
        Latin America  

2011

    61%            18%            14%            7%   

2010

    61%            20%            13%            6%   

2009

    63%            20%            12%            5%   

 

Earnings Per Share
Earnings Per Share

16. 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)   2011         2010         2009  

Numerator:

                               

Net Income

  $ 1,585         $ 3,108         $ 2,549  

Denominator:

                               

Denominator for basic earnings per share:

                               

Weighted-average shares outstanding

    338,159,409           339,685,143           336,725,625  

Denominator for diluted earnings per share:

                               

Share-based compensation plans

    2,620,815           1,561,244           813,669  

Adjusted weighted-average shares outstanding and assumed conversions

    340,780,224           341,246,387           337,539,294  

Basic earnings per share

  $ 4.68         $ 9.15         $ 7.57  

Diluted earnings per share

  $ 4.65         $ 9.11         $ 7.55  

 

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. For the years ended December 31, 2011, 2010, and 2009, the potential anti-dilutive share conversions were 111,326 shares, 256,868 shares, and 1,230,881 shares, respectively.

Related Party Transactions
Related Party Transactions

17. 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, the balance of which was $29 million and $30 million, at December 31, 2011 and 2010, 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

18. Statutory financial information

 

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.

 

There are no statutory restrictions on the payment of dividends from retained earnings by any of the Bermuda subsidiaries as the minimum statutory capital and surplus requirements are satisfied by the share capital and additional paid-in capital of each of the Bermuda subsidiaries.

 

Our U.S. 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. The statutory capital and surplus of the U.S. subsidiaries met regulatory requirements for 2011, 2010, and 2009. The amount of dividends available to be paid in 2012, without prior approval from the state insurance departments, totals $653 million.

 

The following table presents the combined statutory capital and surplus and statutory net income (loss) of the Bermuda, U.S., and Swiss subsidiaries at and for the years ended December 31, 2011, 2010, and 2009:

 

    Bermuda Subsidiaries
(in millions of U.S. dollars)   2011         2010         2009      

Statutory capital and surplus

  $ 11,786         $ 11,484         $ 9,164      

Statutory net income

  $ 713       $ 2,175         $ 2,369      
    U.S. Subsidiaries
    2011         2010         2009      

Statutory capital and surplus

  $ 5,851         $ 6,279         $ 5,885      

Statutory net income

  $ 693         $ 1,025         $ 904      
    Swiss Subsidiaries
    2011         2010         2009      

Statutory capital and surplus

  $ 578         $ 518         $ 468      

Statutory net income (loss)

  $ 20         $ 35         $ (12    

 

As permitted 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 $192 million, $206 million, and $215 million at December 31, 2011, 2010, and 2009, respectively.

 

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.

Information Provided In Connection With Outstanding Debt Of Subsidiaries
Information Provided In Connection With Outstanding Debt Of Subsidiaries

19. Information provided in connection with outstanding debt of subsidiaries

 

The following tables present condensed consolidating financial information at December 31, 2011 and December 31, 2010, and for the years ended December 31, 2011, 2010, and 2009 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 Unaudited Quarterly Financial Data
Condensed Unaudited Quarterly Financial Data

20. Condensed unaudited quarterly financial data

 

    Three Months Ended  

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

 

March 31

2011

       

June 30

2011

        September 30
2011
        December 31
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)

  $ 259          $ 607          $ (31       $ 750   

Basic earnings per share

  $ 0.77          $ 1.79          $ (0.09       $ 2.22   

Diluted earnings per share

  $ 0.76          $ 1.77          $ (0.09       $ 2.20   
    Three Months Ended  

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

 

March 31

2010

       

June 30

2010

        September 30
2010
        December 31
2010
 

Net premiums earned

  $ 3,277          $ 3,233          $ 3,422          $ 3,572   

Net investment income

    504            518            516            532   

Net realized gains (losses) including OTTI

    168            9            (50         305   

Total revenues

  $ 3,949          $ 3,760          $ 3,888          $ 4,409   

Losses and loss expenses

  $ 1,921          $ 1,800          $ 1,887          $ 1,971   

Policy benefits

  $ 87          $ 87          $ 93          $ 90   

Net income

  $ 755          $ 677          $ 675          $ 1,001   

Basic earnings per share

  $ 2.23          $ 1.99          $ 1.98          $ 2.94   

Diluted earnings per share

  $ 2.22          $ 1.98          $ 1.97          $ 2.92   
Schedule II - Condensed Financial Information Of Registrant
Condensed Financial Information Of Registrant

SCHEDULE II

ACE Limited and Subsidiaries

 

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

 

BALANCE SHEETS (Parent Company Only)

 

(in millions of U.S. dollars)

 

December 31

2011

       

December 31

2010

 

Assets

                   

Investments in subsidiaries and affiliates on equity basis

  $ 24,055          $ 22,529   

Short-term investments

    1            10   

Other investments, at cost

    32            37   

Total investments

    24,088            22,576   

Cash

    106            308   

Due from subsidiaries and affiliates, net

    498            564   

Other assets

    8            14   

Total assets

  $ 24,700          $ 23,462   

Liabilities

                   

Accounts payable, accrued expenses, and other liabilities

  $ 65          $ 76   

Dividends payable

    119            112   

Short-term debt

               300   

Total liabilities

    184            488   

Shareholders' equity

                   

Common Shares

    10,095            10,161   

Common Shares in treasury

    (327         (330

Additional paid-in capital

    5,326            5,623   

Retained earnings

    7,511            5,926   

Deferred compensation obligation

               2   

Accumulated other comprehensive income

    1,911            1,594   

Common Shares issued to employee trust

               (2

Total shareholders' equity

    24,516            22,974   

Total liabilities and shareholders' equity

  $ 24,700          $ 23,462   

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)   2011         2010         2009  

Revenues

                               

Investment income, including intercompany interest income

  $ 39         $ 38         $ 44  

Equity in net income of subsidiaries and affiliates

    1,504           3,066           2,636  

Net realized gains (losses)

    (4         (42         (75
      1,539           3,062           2,605  

Expenses

                               

Administrative and other (income) expense

    (56         (53         61  

Income tax expense (benefit)

    10           7           (5
      (46         (46         56  

Net income

  $ 1,585         $ 3,108         $ 2,549  

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)   2011         2010         2009  

Net cash flows from operating activities

  $ 762         $ (176       $ 594  

Cash flows from investing activities

                               

Purchases of fixed maturities available for sale

               (1           

Sales of fixed maturities available for sale

    9                      88  

Net derivative instruments settlements

    (3         (3           

Capital contribution to subsidiaries

    (385         (290         (90

Advances (to) from affiliates

    41           851           (174

Other

                          (4

Net cash flows from (used for) investing activities

    (338         557           (180

Cash flows from financing activities

                               

Dividends paid on Common Shares

    (459         (435         (388

Net proceeds from issuance (repayment) of short-term debt

    (300         300             

Proceeds from share-based compensation plans

    133           63           25  

Net cash flows used for financing activities

    (626         (72         (363

Net increase (decrease) in cash

    (202         309           51  

Cash – beginning of year

    308           (1         (52

Cash – end of year

  $ 106         $ 308         $ (1

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

SCHEDULE IV

ACE Limited and Subsidiaries

 

SUPPLEMENTAL INFORMATION CONCERNING REINSURANCE

 

Premiums Earned

 

For the years ended December 31, 2011, 2010, and 2009

(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
 

2011

  $ 17,534         $ 5,496         $ 3,349         $ 15,387           22%   

2010

  $ 15,780         $ 5,792         $ 3,516         $ 13,504           26%   

2009

  $ 15,415         $ 5,943         $ 3,768         $ 13,240           28%   
Schedule VI - Supplementary Information Concerning Property And Casualty Operations
Supplementary Information Concerning Property And Casualty Operations

SCHEDULE VI

ACE Limited and Subsidiaries

 

SUPPLEMENTARY INFORMATION CONCERNING PROPERTY AND CASUALTY OPERATIONS

 

As of and for the years ended December 31, 2011, 2010, and 2009

(in millions of U.S. dollars)

                                                        
     Deferred
Policy
Acquisition
Costs
         Net Reserves
for Unpaid
Losses and
Loss
Expenses
         Unearned
Premiums
         Net
Premiums
Earned
        

Net
Investment
Income

         Net Losses and Loss
Expenses
Incurred Related to
         Amortization
of Deferred
Policy
Acquisition
Costs
         Net Paid
Losses and
Loss
Expenses
         Net
Premiums
Written
 
                            Current
Year
         Prior Year                 

2011

   $ 1,668           $ 25,875          $ 6,334          $ 14,645          $ 2,108          $ 10,076          $ (556 )         $ 2,347          $ 8,866          $ 14,582  

2010

   $ 1,581          $ 25,242          $ 6,330          $ 12,981          $ 1,996          $ 8,082          $ (503        $ 2,252          $ 7,413          $ 13,166  

2009

   $ 1,396          $ 25,038          $ 6,067          $ 12,713          $ 1,940          $ 7,998          $ (576        $ 2,076          $ 6,948          $ 12,735  
Summary Of Significant Accounting Policies (Policy)

 

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.

 

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 and 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 underwriting and other costs that vary with, and are primarily related to, the production of premium. 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. Policy acquisition costs on P&C contracts are generally amortized ratably over the period in which premiums are earned. Policy acquisition costs on long duration contracts are amortized over the estimated life of the contracts, generally in proportion to premium revenue recognized. 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, principally related to A&H business produced by the Insurance – Overseas General segment, which are deferred and recognized over the expected future benefit period. 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 and amortized over five years, 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 was $236 million and $253 million at December 31, 2011 and 2010, respectively. The amortization expense for deferred marketing costs was $128 million, $115 million, and $103 million for the years ended December 31, 2011, 2010, and 2009, 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 obtain reinsurance status for accounting purposes, 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 25 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 $35 million and $92 million at December 31, 2011 and 2010, 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 maturity investments 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 its 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 it earns 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 $350 million in the aggregate). Our revolving 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 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 $59 million net of discount held at December 31, 2011, representing structured settlements for which the timing and amount of future claim payments are reliably determinable, ACE does not discount its P&C loss reserves. 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, 2011, the gross liability for the amount due to claimants was $644 million and reinsurance recoverables for amounts due from the life insurance companies was $585 million. For structured settlement contracts where payments are guaranteed regardless of claimant life expectancy, the amounts recoverable from the life insurance companies are included in Other assets, as they do not meet the requirements for reinsurance accounting. At December 31, 2011, there was $59 million included in Other assets in the consolidated balance sheets relating to structured settlements.

 

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. Commencing with the quarter ended September 30, 2009, prior period development for the crop business includes adjustments to both crop losses and loss expenses and the related crop profit share commission.

 

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 and 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 one percent to six percent and one percent to seven percent at December 31, 2011 and 2010, 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 have assets that do not qualify for separate account reporting under GAAP (failed separate accounts). The assets related to failed separate accounts are 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 failed separate account assets are reported in Other income (expense) and the offsetting movements in the failed separate account 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 fees 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 ceded 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 $133 million and $144 million at December 31, 2011 and 2010, 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 $318 million and $351 million and contract holder deposit funds of $345 million and $70 million at December 31, 2011 and 2010, respectively. 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 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 $21 million, $85 million, and $26 million for the years ended December 31, 2011, 2010, and 2009, 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 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 2011 and 2010, 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 2011, 2010, or 2009.

 

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.

Investments (Tables)
   

December 31

2011

       

December 31

2010

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

Available for sale

                                           

Due in 1 year or less

  $ 2,321         $ 2,349         $ 1,846         $ 1,985  

Due after 1 year through 5 years

    12,325           12,722           13,094           13,444  

Due after 5 years through 10 years

    12,379           12,995           10,276           10,782  

Due after 10 years

    3,446           3,700           2,818           2,812  
      30,471           31,766           28,034           29,023  

Mortgage-backed securities

    9,979           10,201           8,508           8,516  
    $ 40,450         $ 41,967         $ 36,542         $ 37,539  

Held to maturity

                                           

Due in 1 year or less

  $ 393         $ 396         $ 400         $ 404  

Due after 1 year through 5 years

    2,062           2,090           1,983           2,010  

Due after 5 years through 10 years

    2,376           2,399           2,613           2,524  

Due after 10 years

    667           684           694           677  
      5,498           5,569           5,690           5,615  

Mortgage-backed securities

    2,949           3,036           3,811           3,846  
    $ 8,447         $ 8,605         $ 9,501         $ 9,461  

(in millions of U.S. dollars)

 

December 31

2011

       

December 31

2010

 

Cost

  $ 671         $ 666  

Gross unrealized appreciation

    18           28  

Gross unrealized depreciation

    (42         (2

Fair value

  $ 647         $ 692  
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

    4.8%            1.1%   

B

    12.8%            3.4%   

Caa-C

    53.5%            13.9%   
    Years Ended December 31  

(in millions of U.S. dollars)

  2011         2010         2009  

Fixed maturities:

                               

OTTI on fixed maturities, gross

  $ (61       $ (115       $ (536

OTTI on fixed maturities recognized in OCI (pre-tax)

    15           69           302  

OTTI on fixed maturities, net

    (46         (46         (234

Gross realized gains excluding OTTI

    410           569           591  

Gross realized losses excluding OTTI

    (200         (143         (398

Total fixed maturities

    164           380           (41

Equity securities:

                               

OTTI on equity securities

    (1                    (26

Gross realized gains excluding OTTI

    15           86           105  

Gross realized losses excluding OTTI

    (5         (2         (224

Total equity securities

    9           84           (145

OTTI on other investments

    (3         (13         (137

Foreign exchange losses

    (13         (54         (21

Investment and embedded derivative instruments

    (143         58           68  

Fair value adjustments on insurance derivative

    (779         (28         368  

S&P put options and futures

    (4         (150         (363

Other derivative instruments

    (4         (19         (93

Other

    (22         174           168  

Net realized gains (losses)

    (795         432           (196

Change in net unrealized appreciation (depreciation) on investments:

                               

Fixed maturities available for sale

    569           451           2,723  

Fixed maturities held to maturity

    (89         522           (6

Equity securities

    (47         (44         213  

Other

    40           (35         162  

Income tax expense

    (157         (152         (481

Change in net unrealized appreciation on investments

    316           742           2,611  

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

  $ (479       $ 1,174         $ 2,415  
    Years Ended December 31        

Nine Months Ended
December 31

2009

 
(in millions of U.S. dollars)   2011         2010        

Balance of credit losses related to securities still held-beginning of period

  $ 137         $ 174         $ 130  

Additions where no OTTI was previously recorded

    12           34           104  

Additions where an OTTI was previously recorded

    8           12           11  

Reductions reflecting amounts previously recorded in OCI but subsequently reflected in net income

                          (2

Reductions for securities sold during the period

    (83         (83         (69

Balance of credit losses related to securities still held-end of period

  $ 74         $ 137         $ 174  
   

December 31

2011

        

December 31

2010

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

Investment funds

  $ 378         $ 277         $ 329         $ 232  

Limited partnerships

    531           429           438           356  

Partially-owned investment companies

    904           904           688           688  

Life insurance policies

    127           127           118           118  

Policy loans

    143           143           54           54  

Trading securities

    194           195           37           35  

Other

    37           37           28           28  

Total

  $ 2,314         $ 2,112         $ 1,692         $ 1,511  
   

December 31

2011

       

December 31

2010

           

(in millions of U.S. dollars, except percentages)

 

Carrying

Value

        Issued Share
Capital
        Ownership
Percentage
       

Carrying

Value

        Issued Share
Capital
        Ownership
Percentage
        Domicile  

Freisenbruch-Meyer

  $ 8         $ 5           40.0%          $ 8         $ 5           40.0%            Bermuda   

ACE Cooperative Ins. Co. – Saudi Arabia

    7           27           30.0%            7           27           30.0%            Saudi Arabia   

Huatai Insurance Company

    241           457           20.0%            229           207           21.3%            China   

Huatai Life Insurance Company

    118           196           20.0%            112           179           20.0%            China   

Russian Reinsurance Company

    2           4           23.3%                                             Russia   

Island Heritage

    4           27           10.8%            4           27           10.8%            Cayman Islands   

Total

  $ 380         $ 716                     $ 360         $ 445                          
    Years Ended December 31  

(in millions of U.S. dollars)

  2011          2010         2009  

Fixed maturities

  $ 2,196         $ 2,071         $ 1,985  

Short-term investments

    43           34           38  

Equity securities

    36           26           54  

Other

    62           44           48  

Gross investment income

    2,337           2,175           2,125  

Investment expenses

    (95         (105         (94

Net investment income

  $ 2,242         $ 2,070         $ 2,031  
Fair Value Measurements (Tables)
                                                         
             

December 31

2011

       

December 31

2010

 

(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          $ 205         $ 141         $ 192         $ 151  

Real estate

    3 to 9 Years            270           96           163           92  

Distressed

    6 to 9 Years            182           57           243           43  

Mezzanine

    6 to 9 Years            195           282           125           173  

Traditional

    3 to 8 Years            565           200           376           291  

Vintage

    1 to 3 Years            18           1           27           3  

Investment funds

    Not Applicable            378                      329             
                $ 1,813         $ 777         $ 1,455         $ 753  
                                             
   

December 31

2011

 

December 31

2010

 
(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

  $ 1,078         $ 1,126         $ 1,105         $ 1,127  

Foreign

    935           930           1,049           1,013  

Corporate securities

    2,338           2,337           2,361           2,313  

Mortgage-backed securities

    2,949           3,036           3,811           3,846  

States, municipalities, and political subdivisions

    1,147           1,176           1,175           1,162  

Total fixed maturities held to maturity

    8,447           8,605           9,501           9,461  

Liabilities:

                                           

Short-term debt

    1,251           1,251           1,300           1,300  

Long-term debt

    3,360           3,823           3,358           3,690  

Trust preferred securities

    309           404           309           364  

Total liabilities

  $ 4,920         $ 5,478         $ 4,967         $ 5,354  
Reinsurance (Tables)
    Years Ended December 31  
(in millions of U.S. dollars)   2011         2010         2009  

Premiums written

                               

Direct

  $ 17,626          $ 15,887         $ 15,467  

Assumed

    3,205            3,624           3,697  

Ceded

    (5,459         (5,803         (5,865

Net

  $ 15,372         $ 13,708         $ 13,299  

Premiums earned

                               

Direct

  $ 17,534         $ 15,780         $ 15,415  

Assumed

    3,349           3,516           3,768  

Ceded

    (5,496         (5,792         (5,943

Net

  $ 15,387         $ 13,504         $ 13,240  

(in millions of U.S. dollars)

 

December 31

2011

       

December 31

2010

 

Reinsurance recoverable on unpaid losses and loss expenses, net of a provision for uncollectible reinsurance

  $ 11,602         $ 12,149  

Reinsurance recoverable on paid losses and loss expenses, net of a provision for uncollectible reinsurance

    787           722  

Net reinsurance recoverable on losses and loss expenses

  $ 12,389         $ 12,871  
(in millions of U.S. dollars, except percentages)    2011          Provision          % of
Gross
 

Categories

                                  

Largest reinsurers

   $ 6,230          $ 109            1.7%   

Other reinsurers balances rated A- or better

     3,109            57            1.8%   

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

     667            108            16.2%   

Other pools and government agencies

     122            8            6.6%   

Structured settlements

     585            22            3.8%   

Other captives

     1,842            37            2.0%   

Other

     313            138            44.1%   

Total

   $ 12,868          $ 479            3.7%   

 

Largest Reinsurers

         

Berkshire Hathaway Insurance Group

   Munich Re Group    Swiss Re Group

Everest Re Group

   National Workers Compensation    Transatlantic Holdings

HDI Re Group (Hanover Re)

  

Reinsurance Pool

   XL Capital Group

Lloyd's of London

   Partner Re     

 

    Years Ended December 31  

(in millions of U.S. dollars)

  2011         2010         2009  

GMDB

                               

Net premiums earned

  $ 98         $ 109         $ 104  

Policy benefits and other reserve adjustments

  $ 59         $ 99         $ 111  

GLB

                               

Net premiums earned

  $ 163         $ 164         $ 159  

Policy benefits and other reserve adjustments

    47           29           20  

Net realized gains (losses)

    (812         (64         368  

(Loss) gain recognized in income

  $ (696       $ 71         $ 507  

Net cash received

  $ 161         $ 160         $ 156  

Net (increase) decrease in liability

  $ (857       $ (89       $ 351  
Intangible Assets (Tables)
(in millions of U.S. dollars)   Insurance -
North American
        Insurance -
Overseas General
        Global
Reinsurance
        Life         ACE
Consolidated
 

Balance at December 31, 2009

  $ 1,205         $ 1,497         $ 365         $ 747         $ 3,814  

Acquisition of Rain and Hail

    135                                            135  

Acquisition of Jerneh

               94                                 94  

Purchase price allocation adjustment

                                     3           3  

Foreign exchange revaluation and other

    11           (27                               (16

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

                                     121           121  

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         $ 862         $ 4,180  
(in millions of U.S. dollars)   2011         2010         2009  

Balance, beginning of year

  $ 634         $ 748         $ 823  

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

    120                        

Amortization expense

    (105         (111         (130

Foreign exchange revaluation

    (1         (3         55  

Balance, end of year

  $ 648         $ 634         $ 748  

For the Year Ending December 31

(in millions of U.S. dollars)

     

2012

  $ 96  

2013

    86  

2014

    77  

2015

    70  

2016

    65  

Total

  $ 394  
Unpaid Losses And Loss Expenses (Tables)
    Asbestos   Environmental   Total  
(in millions of U.S. dollars)   Gross         Net         Gross         Net         Gross         Net  

Balance at December 31, 2010

  $ 2,130         $ 1,120         $ 316         $ 215         $ 2,446         $ 1,335  

Incurred activity

    148           67           66           37           214           104  

Payment activity

    (311         (168         (99         (75         (410         (243

Balance at December 31, 2011

  $ 1,967         $ 1,019         $ 283         $ 177         $ 2,250         $ 1,196  
    Westchester Specialty   NICO Coverage         Net of NICO
Coverage
 
(in millions of U.S. dollars)   A&E         Other         Total            

Balance at December 31, 2010

  $ 122         $ 87         $ 209         $ 186         $ 23  

Incurred activity

    48           (29         19           14           5  

Paid activity

    (27         (4         (31         (35         4  

Balance at December 31, 2011

  $ 143         $ 54         $ 197         $ 165         $ 32  
Taxation (Tables)
    Years Ended December 31  

(in millions of U.S. dollars)

  2011         2010         2009  

Current tax expense

  $ 485          $ 443          $ 547   

Deferred tax expense (benefit)

    21            116            (19

Provision for income taxes

  $ 506          $ 559          $ 528   
    Years Ended December 31  

(in millions of U.S. dollars)

  2011         2010         2009  

Expected tax provision at Swiss statutory tax rate

  $ 164         $ 287         $ 241  

Permanent differences:

                               

Taxes on earnings subject to rate other than Swiss statutory tax rate

    323           327           319  

Tax-exempt interest and dividends received deduction, net of proration

    (21         (20         (25

Net withholding taxes

    19           15           14  

Change in valuation allowance

    (2         (3         (48

Non-taxable acquisition gain

               (61           

Other

    23           14           27  

Total provision for income taxes

  $ 506         $ 559         $ 528  

(in millions of U.S. dollars)

 

December 31

2011

       

December 31

2010

 

Deferred tax assets:

                   

Loss reserve discount

  $ 933         $ 852  

Unearned premiums reserve

    85           87  

Foreign tax credits

    1,074           952  

Investments

    67           51  

Provision for uncollectible balances

    113           132  

Loss carry-forwards

    43           57  

Other, net

    31           114  

Cumulative translation adjustment

    5           2  

Total deferred tax assets

    2,351           2,247  

Deferred tax liabilities:

                   

Deferred policy acquisition costs

    107           100  

VOBA and other intangible assets

    373           367  

Un-remitted foreign earnings

    810           718  

Unrealized appreciation on investments

    392           262  

Total deferred tax liabilities

    1,682           1,447  

Valuation allowance

    57           31  

Net deferred tax assets

  $ 612         $ 769  

(in millions of U.S. dollars)

 

December 31

2011

       

December 31

2010

 

Balance, beginning of year

  $ 139         $ 155  

Additions based on tax positions related to the current year

    1           1  

Reductions for tax positions of prior years

    (6         (17

Balance, end of year

  $ 134         $ 139  
Debt (Tables)
Schedule Of Debt Outstanding

(in millions of U.S. dollars)

 

December 31

2011

       

December 31

2010

 

Short-term debt

                   

ACE Limited revolving credit facility

  $          $ 300  

Reverse repurchase agreements

    1,251           1,000  
    $ 1,251         $ 1,300  

Long-term debt

                   

ACE INA senior notes due 2014

  $ 500         $ 500  

ACE INA senior notes due 2015

    449           447  

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         $ 3,358  

Trust Preferred Securities

                   

ACE INA capital securities due 2030

  $ 309         $ 309  
Commitments, Contingencies, And Guarantees (Tables)
         

For the year ending December 31

(in millions of U.S. dollars)

     

2012

  $ 93  

2013

    72  

2014

    60  

2015

    54  

2016

    52  

Thereafter

    166  

Total minimum future lease commitments

  $ 497  
Shareholders' Equity (Tables)
Rollforward Of Changes In Common Shares Issued And Outstanding
    Years Ended December 31  
    2011         2010         2009  

Shares issued, beginning of year

    341,094,559           337,841,616           335,413,501  

Shares issued, net

               2,268,000           2,000,000  

Exercise of stock options

    1,737,853           984,943           168,720  

Shares issued under ESPP

                          259,395  

Shares issued, end of year

    342,832,412           341,094,559           337,841,616  

Common Shares in treasury, end of year

    (5,905,136         (6,151,707         (1,316,959

Shares issued and outstanding, end of year

    336,927,276           334,942,852           336,524,657  

Common Shares issued to employee trust

                               

Balance, beginning of year

    (101,481         (101,481         (108,981

Shares redeemed

    92,014                      7,500  

Balance, end of year

    (9,467         (101,481         (101,481
Share-Based Compensation (Tables)
    Years Ended December 31  
    2011         2010         2009  

Dividend yield

    2.2%            2.5%            2.8%   

Expected volatility

    28.8%            30.3%            45.4%   

Risk-free interest rate

    2.3%            2.5%            2.2%   

Forfeiture rate

    6.5%            7.5%            7.5%   

Expected life

    5.4 years            5.4 years            5.4 years   
   

Number of

Options

        Weighted-Average
Exercise Price
 

Options outstanding, December 31, 2008

    9,923,563         $ 46.24  

Granted

    2,339,036         $ 38.60  

Exercised

    (537,556       $ 27.71  

Forfeited

    (241,939       $ 50.48  

Options outstanding, December 31, 2009

    11,483,104         $ 45.46  

Granted

    2,094,227         $ 50.38  

Exercised

    (1,328,715       $ 40.11  

Forfeited

    (305,723       $ 49.77  

Options outstanding, December 31, 2010

    11,942,893         $ 46.80  

Granted

    1,649,824         $ 62.68  

Exercised

    (2,741,238       $ 44.45  

Forfeited

    (271,972       $ 51.33  

Options outstanding, December 31, 2011

    10,579,507         $ 49.78  

Options exercisable, December 31, 2011

    7,044,330         $ 47.80  
    Number of
Restricted Stock
        Weighted-Average
Grant-Date Fair
Value
 

Unvested restricted stock, December 31, 2008

    3,883,230         $ 57.01  

Granted

    2,603,344         $ 39.05  

Vested and issued

    (1,447,676       $ 54.85  

Forfeited

    (165,469       $ 51.45  

Unvested restricted stock, December 31, 2009

    4,873,429         $ 48.25  

Granted

    2,461,076         $ 51.09  

Vested and issued

    (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 and issued

    (1,929,189       $ 50.82  

Forfeited

    (333,798       $ 47.46  

Unvested restricted stock, December 31, 2011

    4,851,490         $ 52.20  
Pension Plans (Tables)
Schedule Of Expected Future Payments

For the year ending December 31

(in millions of U.S. dollars)

     

2012

  $ 22  

2013

    23  

2014

    22  

2015

    24  

2016

    25  

2017-2021

    131  
Other (Income) Expense (Tables)
Components Of Other (Income) Expense
Segment Information (Tables)
For the year ended December 31, 2011

(in millions of U.S. dollars)

 

Property &

All Other

        Casualty         Life, Accident &
Health
        ACE
Consolidated
 

Insurance – North American

  $ 3,174         $ 3,380         $ 357         $ 6,911  

Insurance – Overseas General

    2,080           1,415           2,242           5,737  

Global Reinsurance

    458           545                      1,003  

Life

                          1,736           1,736  
    $ 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           2,016           5,240  

Global Reinsurance

    520           551                      1,071  

Life

                          1,542           1,542  
    $ 3,898         $ 5,752         $ 3,854         $ 13,504  
For the year ended December 31, 2009                                    

Insurance – North American

  $ 1,690         $ 3,734         $ 260         $ 5,684  

Insurance – Overseas General

    1,787           1,420           1,940           5,147  

Global Reinsurance

    546           433                      979  

Life

                          1,430           1,430  
    $ 4,023         $ 5,587         $ 3,630         $ 13,240  
Year ended   North America         Europe         Asia
Pacific/Far East
        Latin America  

2011

    61%            18%            14%            7%   

2010

    61%            20%            13%            6%   

2009

    63%            20%            12%            5%   
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)   2011         2010         2009  

Numerator:

                               

Net Income

  $ 1,585         $ 3,108         $ 2,549  

Denominator:

                               

Denominator for basic earnings per share:

                               

Weighted-average shares outstanding

    338,159,409           339,685,143           336,725,625  

Denominator for diluted earnings per share:

                               

Share-based compensation plans

    2,620,815           1,561,244           813,669  

Adjusted weighted-average shares outstanding and assumed conversions

    340,780,224           341,246,387           337,539,294  

Basic earnings per share

  $ 4.68         $ 9.15         $ 7.57  

Diluted earnings per share

  $ 4.65         $ 9.11         $ 7.55  
Statutory Financial Information (Tables)
Combined Statutory Capital And Surplus And Statutory Net Income (Loss) Of The Bermuda, U.S., And Swiss Subsidiaries
    Bermuda Subsidiaries
(in millions of U.S. dollars)   2011         2010         2009      

Statutory capital and surplus

  $ 11,786         $ 11,484         $ 9,164      

Statutory net income

  $ 713       $ 2,175         $ 2,369      
    U.S. Subsidiaries
    2011         2010         2009      

Statutory capital and surplus

  $ 5,851         $ 6,279         $ 5,885      

Statutory net income

  $ 693         $ 1,025         $ 904      
    Swiss Subsidiaries
    2011         2010         2009      

Statutory capital and surplus

  $ 578         $ 518         $ 468      

Statutory net income (loss)

  $ 20         $ 35         $ (12    
Information Provided In Connection With Outstanding Debt Of Subsidiaries (Tables)
Condensed Unaudited Quarterly Financial Data (Tables)
Schedule Of Condensed Unaudited Quarterly Financial Data
    Three Months Ended  

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

 

March 31

2011

       

June 30

2011

        September 30
2011
        December 31
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)

  $ 259          $ 607          $ (31       $ 750   

Basic earnings per share

  $ 0.77          $ 1.79          $ (0.09       $ 2.22   

Diluted earnings per share

  $ 0.76          $ 1.77          $ (0.09       $ 2.20   
    Three Months Ended  

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

 

March 31

2010

       

June 30

2010

        September 30
2010
        December 31
2010
 

Net premiums earned

  $ 3,277          $ 3,233          $ 3,422          $ 3,572   

Net investment income

    504            518            516            532   

Net realized gains (losses) including OTTI

    168            9            (50         305   

Total revenues

  $ 3,949          $ 3,760          $ 3,888          $ 4,409   

Losses and loss expenses

  $ 1,921          $ 1,800          $ 1,887          $ 1,971   

Policy benefits

  $ 87          $ 87          $ 93          $ 90   

Net income

  $ 755          $ 677          $ 675          $ 1,001   

Basic earnings per share

  $ 2.23          $ 1.99          $ 1.98          $ 2.94   

Diluted earnings per share

  $ 2.22          $ 1.98          $ 1.97          $ 2.92   
Summary Of Significant Accounting Policies (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
years
Dec. 31, 2010
Dec. 31, 2009
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Amount of deferred marketing costs reported in deferred policy acquisition costs
$ 236 
$ 253 
 
Amortization expense for deferred marketing costs
128 
115 
103 
Deferred marketing costs recoverability and amortized years
 
 
Reinsurance business assumed
35 
92 
 
Recoverable from unrated reinsurers, ceded reserve, default factor
25.00% 
 
 
Borrowers collateral, percent of fair value loaned securities
102.00% 
 
 
Maximum overdraft balance guaranteed
350 
 
 
Goodwill impairment testing, qualitative assessment, percentage probability
50.00% 
 
 
Finite lived intangible assets, amortized over useful lives, minimum in years
 
 
Finite lived intangible assets, amortized over useful lives, maximum in years
20 
 
 
Net loss and loss expense reserves, net of discount held
59 
 
 
Gross liability for amount due to claimants
644 
 
 
Reinsurance recoverables
585 
 
 
Structured settlements included in other assets
59 
 
 
Deposit assets
133 
144 
 
Deposit liabilities include reinsurance deposit liabilities
318 
351 
 
Contract holder deposit funds
345 
70 
 
Net operating results of ESIS included within administrative expenses
21 
85 
26 
Recognized income tax positions, percentage
50.00% 
 
 
Decrease in Retained earnings
7,511 
5,926 
 
Minimum [Member]
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Coverage terms of related reinsurance contracts and range in years
 
 
Reinsurance business, payment pattern of the losses assumed and range years
 
 
Interest rates used in calculating reserves
1.00% 
1.00% 
 
Maximum [Member]
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Coverage terms of related reinsurance contracts and range in years
 
 
Reinsurance business, payment pattern of the losses assumed and range years
40 
 
 
Interest rates used in calculating reserves
6.00% 
7.00% 
 
Accounting For Costs Associated With Acquiring Or Renewing Insurance Contracts [Member]
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Decrease in Retained earnings
$ 188 
 
 
Acquisitions (Details) (USD $)
0 Months Ended
Mar. 31, 2011
New York Life's Korea And Hong Kong [Member]
Dec. 28, 2010
Rain And Hail Insurance Service Inc [Member]
Nov. 30, 2011
Penn Millers Holding Corporation [Member]
Nov. 30, 2010
Jerneh Insurance Berhad [Member]
Nov. 30, 2010
Rain And Hail And Jerneh [Member]
Noncash or Part Noncash Acquisitions [Line Items]
 
 
 
 
 
Acquisition purchase price
$ 425,000,000 
$ 1,100,000,000 
$ 107,000,000 
$ 218,000,000 
 
Ownership recorded in investments
 
20.10% 
 
 
 
Ownership disposed
 
20.10% 
 
 
 
Percentage of assets and liabilities acquired
 
100.00% 
 
 
 
Recognized gain in net realized gains (losses)
 
175,000,000 
 
 
 
Goodwill generated in acquisitions
121,000,000 
123,000,000 
 
 
 
Goodwill expected to be deductible for income tax
 
 
 
 
Other intangible assets generated in acquisition
130,000,000 
523,000,000 
 
 
 
Reverse purchase agreements used to finance acquisitions
 
 
 
 
1,000,000,000 
Legal and other expenses incurred to complete acquisition
 
$ 2,000,000 
 
 
 
Investments (Narrative) (Details) (USD $)
12 Months Ended
Dec. 31, 2011
securities
Dec. 31, 2010
Dec. 31, 2009
Investments [Abstract]
 
 
 
Residential MBS with shorter durations being transferred from Fixed Maturities AFS
 
$ 6,800,000,000 
 
Net unrealized appreciation (depreciation) included in OCI
48,000,000 
193,000,000 
 
Net unrealized depreciation included in AOCI
155,000,000 
99,000,000 
 
Percentage of mortgage-backed securities represented by investments in US government agency bonds
84.00% 
79.00% 
 
Portion of gross unrealized loss represented by united states treasury and agency obligations
15,000,000 
 
 
Company assumed recovery rate
25.00% 
 
 
Moodys historical mean recovery rate
41.00% 
 
 
Credit losses recognized in net income for corporate securities
9,000,000 
14,000,000 
59,000,000 
Credit losses in net income relating to mortgage-backed securities
11,000,000 
32,000,000 
56,000,000 
Number of fixed maturities in an unrealized loss position
3,873 
 
 
Limited partnerships number
59 
 
 
Trading securities - mutual funds
162,000,000 
 
 
Trading securities - equity securities
24,000,000 
28,000,000 
 
Trading securities - fixed maturities
8,000,000 
9,000,000 
 
Total number of fixed maturities
22,198 
 
 
Largest single unrealized loss in the fixed maturities
9,000,000 
 
 
Number of equity securities in an unrealized loss position
77 
 
 
Total number of equity securities
179 
 
 
Largest single unrealized loss in the equity securities
32,000,000 
 
 
Restricted assets in fixed maturities and short-term investments
14,900,000,000 
13,000,000,000 
 
Restricted assets in cash
$ 179,000,000 
$ 104,000,000 
 
Investments (Schedule Of Amortized Cost And Fair Value Of Fixed Maturities By Contractual Maturity) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Investments [Abstract]
 
 
Available for sale, Due in 1 year or less, Amortized Cost
$ 2,321 
$ 1,846 
Available for sale, Due after 1 year through 5 years, Amortized Cost
12,325 
13,094 
Available for sale, Due after 5 years though 10 years, Amortized Cost
12,379 
10,276 
Available for sale, Due after 10 years, Amortized Cost
3,446 
2,818 
Available for sale, Subtotal, Amortized Cost
30,471 
28,034 
Available for sale, Mortgage-backed securities, Amortized Cost
9,979 
8,508 
Available for sale, Amortized Cost
40,450 
36,542 
Available for sale, Due in 1 year or less, Fair Value
2,349 
1,985 
Available for sale, Due after 1 year through 5 years, Fair Value
12,722 
13,444 
Available for sale, Due after 5 years through 10 years, Fair Value
12,995 
10,782 
Available for sale, Due after 10 years, Fair Value
3,700 
2,812 
Available for sale, Subtotal, Fair Value
31,766 
29,023 
Available for sale, Mortgage backed securities, Fair Value
10,201 
8,516 
Available for sale, Fair Value
41,967 
37,539 
Held to maturity, Due in 1 year or less, Amortized Cost
393 
400 
Held to maturity, Due after 1 year through 5 years, Amortized Cost
2,062 
1,983 
Held to maturity, Due after 5 years through 10 years, Amortized Cost
2,376 
2,613 
Held to maturity, Amortized Cost
667 
694 
Held to maturity, Subtotal, Amortized Cost
5,498 
5,690 
Held to maturity, Mortgage backed securities, Amortized Cost
2,949 
3,811 
Held to maturity, Amortized Cost
8,447 
9,501 
Held to maturity, Due in 1 year or less, Fair Value
396 
404 
Held to maturity, Due after 1 year through 5, Fair Value
2,090 
2,010 
Held to maturity, Due after 5 years through 10 years, Fair Value
2,399 
2,524 
Held to maturity, Due after 10 years, Fair Value
684 
677 
Held to maturity, Subtotal, Fair Value
5,569 
5,615 
Held to maturity, Mortgage backed securities, Fair Value
3,036 
3,846 
Held to maturity, Fair Value
$ 8,605 
$ 9,461 
Investments (Schedule Of Cost And Fair Value Of Equity Securities) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Investments [Abstract]
 
 
Cost
$ 671 
$ 666 
Gross unrealized appreciation
18 
28 
Gross unrealized depreciation
(42)
(2)
Fair value
$ 647 
$ 692 
Investments (Schedule Of Default Assumptions By Moody's Rating Category) (Details)
12 Months Ended
Dec. 31, 2011
Investment Grade [Member] |
Minimum [Member] |
Aaa-Baa [Member]
 
Financing Receivable, Recorded Investment [Line Items]
 
1-in-100 Year Default Rate
0.00% 
Historical Mean Default Rate
0.00% 
Investment Grade [Member] |
Maximum [Member] |
Aaa-Baa [Member]
 
Financing Receivable, Recorded Investment [Line Items]
 
1-in-100 Year Default Rate
1.40% 
Historical Mean Default Rate
0.30% 
Below Investment Grade [Member] |
Ba [Member]
 
Financing Receivable, Recorded Investment [Line Items]
 
1-in-100 Year Default Rate
4.80% 
Historical Mean Default Rate
1.10% 
Below Investment Grade [Member] |
B [Member]
 
Financing Receivable, Recorded Investment [Line Items]
 
1-in-100 Year Default Rate
12.80% 
Historical Mean Default Rate
3.40% 
Below Investment Grade [Member] |
Caa-C [Member]
 
Financing Receivable, Recorded Investment [Line Items]
 
1-in-100 Year Default Rate
53.50% 
Historical Mean Default Rate
13.90% 
Investments (Schedule Of Significant Assumptions Used To Estimate Future Cash Flows For Specific Mortgage-Backed Securities Evaluated For Potential Credit Loss By Sector And Vintage) (Details)
12 Months Ended
Dec. 31, 2011
2003 and Prior Vintage [Member] |
Prime [Member]
 
Schedule Of Significant Assumptions Used To Estimate Future Cash Flows [Line Items]
 
Default Rate
16.00% 1 2
Loss Severity Rate
29.00% 1 2
2003 and Prior Vintage [Member] |
ALT-A [Member]
 
Schedule Of Significant Assumptions Used To Estimate Future Cash Flows [Line Items]
 
Default Rate
23.00% 1 2
Loss Severity Rate
48.00% 1 2
2003 and Prior Vintage [Member] |
Sub-Prime [Member]
 
Schedule Of Significant Assumptions Used To Estimate Future Cash Flows [Line Items]
 
Default Rate
45.00% 1 2
Loss Severity Rate
62.00% 1 2
2004 Vintage [Member] |
ALT-A [Member]
 
Schedule Of Significant Assumptions Used To Estimate Future Cash Flows [Line Items]
 
Default Rate
33.00% 1 2
Loss Severity Rate
53.00% 1 2
2004 Vintage [Member] |
Sub-Prime [Member]
 
Schedule Of Significant Assumptions Used To Estimate Future Cash Flows [Line Items]
 
Default Rate
49.00% 1 2
Loss Severity Rate
76.00% 1 2
2004 Vintage [Member] |
Minimum [Member] |
Prime [Member]
 
Schedule Of Significant Assumptions Used To Estimate Future Cash Flows [Line Items]
 
Default Rate
17.00% 1 2
Loss Severity Rate
31.00% 1 2
2004 Vintage [Member] |
Maximum [Member] |
Prime [Member]
 
Schedule Of Significant Assumptions Used To Estimate Future Cash Flows [Line Items]
 
Default Rate
42.00% 1 2
Loss Severity Rate
49.00% 1 2
2005 Vintage [Member] |
Sub-Prime [Member]
 
Schedule Of Significant Assumptions Used To Estimate Future Cash Flows [Line Items]
 
Default Rate
58.00% 1 2
Loss Severity Rate
78.00% 1 2
2005 Vintage [Member] |
Minimum [Member] |
Prime [Member]
 
Schedule Of Significant Assumptions Used To Estimate Future Cash Flows [Line Items]
 
Default Rate
25.00% 1 2
Loss Severity Rate
44.00% 1 2
2005 Vintage [Member] |
Minimum [Member] |
ALT-A [Member]
 
Schedule Of Significant Assumptions Used To Estimate Future Cash Flows [Line Items]
 
Default Rate
30.00% 1 2
Loss Severity Rate
54.00% 1 2
2005 Vintage [Member] |
Maximum [Member] |
Prime [Member]
 
Schedule Of Significant Assumptions Used To Estimate Future Cash Flows [Line Items]
 
Default Rate
45.00% 1 2
Loss Severity Rate
58.00% 1 2
2005 Vintage [Member] |
Maximum [Member] |
ALT-A [Member]
 
Schedule Of Significant Assumptions Used To Estimate Future Cash Flows [Line Items]
 
Default Rate
47.00% 1 2
Loss Severity Rate
67.00% 1 2
2006-2007 Vintage [Member] |
Minimum [Member] |
Prime [Member]
 
Schedule Of Significant Assumptions Used To Estimate Future Cash Flows [Line Items]
 
Default Rate
26.00% 1 2
Loss Severity Rate
43.00% 1 2
2006-2007 Vintage [Member] |
Minimum [Member] |
ALT-A [Member]
 
Schedule Of Significant Assumptions Used To Estimate Future Cash Flows [Line Items]
 
Default Rate
57.00% 1 2
Loss Severity Rate
61.00% 1 2
2006-2007 Vintage [Member] |
Minimum [Member] |
Sub-Prime [Member]
 
Schedule Of Significant Assumptions Used To Estimate Future Cash Flows [Line Items]
 
Default Rate
70.00% 1 2
Loss Severity Rate
70.00% 1 2
2006-2007 Vintage [Member] |
Maximum [Member] |
Prime [Member]
 
Schedule Of Significant Assumptions Used To Estimate Future Cash Flows [Line Items]
 
Default Rate
53.00% 1 2
Loss Severity Rate
58.00% 1 2
2006-2007 Vintage [Member] |
Maximum [Member] |
ALT-A [Member]
 
Schedule Of Significant Assumptions Used To Estimate Future Cash Flows [Line Items]
 
Default Rate
66.00% 1 2
Loss Severity Rate
72.00% 1 2
2006-2007 Vintage [Member] |
Maximum [Member] |
Sub-Prime [Member]
 
Schedule Of Significant Assumptions Used To Estimate Future Cash Flows [Line Items]
 
Default Rate
78.00% 1 2
Loss Severity Rate
86.00% 1 2
Investments (Net Realized Gains (Losses) And The Losses Included In Net Realized Gains (Losses) And OCI) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Sep. 30, 2010
Jun. 30, 2010
Mar. 31, 2010
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Investments [Abstract]
 
 
 
 
 
 
 
 
 
 
 
OTTI on fixed maturities, gross
 
 
 
 
 
 
 
 
$ (61)
$ (115)
$ (536)
OTTI on fixed maturities recognized in OCI (pre-tax)
 
 
 
 
 
 
 
 
15 
69 
302 
OTTI on fixed maturities, net
 
 
 
 
 
 
 
 
(46)
(46)
(234)
Fixed maturities, Gross realized gains excluding OTTI
 
 
 
 
 
 
 
 
410 
569 
591 
Fixed maturities, Gross realized losses excluding OTTI
 
 
 
 
 
 
 
 
(200)
(143)
(398)
Total fixed maturities
 
 
 
 
 
 
 
 
164 
380 
(41)
OTTI on equity securities
 
 
 
 
 
 
 
 
(1)
 
(26)
Equity securities, Gross realized gains excluding OTTI
 
 
 
 
 
 
 
 
15 
86 
105 
Equity securities, Gross realized losses excluding OTTI
 
 
 
 
 
 
 
 
(5)
(2)
(224)
Total equity securities
 
 
 
 
 
 
 
 
84 
(145)
OTTI on other investments
 
 
 
 
 
 
 
 
(3)
(13)
(137)
Foreign exchange losses
 
 
 
 
 
 
 
 
(13)
(54)
(21)
Investment and embedded derivative instruments
 
 
 
 
 
 
 
 
(143)
58 
68 
Fair value adjustments on insurance derivative
 
 
 
 
 
 
 
 
(779)
(28)
368 
S&P put options and futures
 
 
 
 
 
 
 
 
(4)
(150)
(363)
Other derivative instruments
 
 
 
 
 
 
 
 
(4)
(19)
(93)
Other
 
 
 
 
 
 
 
 
(22)
174 
168 
Total net realized gains (losses)
83 
(760)
(73)
(45)
305 
(50)
168 
(795)
432 
(196)
Change in net unrealized appreciation (depreciation) on investments, Fixed maturities available for sale
 
 
 
 
 
 
 
 
569 
451 
2,723 
Change in net unrealized appreciation (depreciation) on investments, Fixed maturities held to maturity
 
 
 
 
 
 
 
 
(89)
522 
(6)
Change in net unrealized appreciation (depreciation) on investments, Equity securities
 
 
 
 
 
 
 
 
(47)
(44)
213 
Change in net unrealized appreciation (depreciation) on investments, Other
 
 
 
 
 
 
 
 
40 
(35)
162 
Change in net unrealized appreciation (depreciation) on investments, Income tax expense
 
 
 
 
 
 
 
 
(157)
(152)
(481)
Change in net unrealized appreciation on investments
 
 
 
 
 
 
 
 
316 
742 
2,611 
Total net realized gains (losses) and change in net unrealized appreciation (depreciation) on investments
 
 
 
 
 
 
 
 
$ (479)
$ 1,174 
$ 2,415 
Investments (Schedule Of Other Investment) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Schedule of Cost-method Investments [Line Items]
 
 
Other investments at fair value
$ 2,314 
$ 1,692 
Other investment at cost
2,112 
1,511 
Fair Value [Member]
 
 
Schedule of Cost-method Investments [Line Items]
 
 
Investment funds
378 
329 
Limited partnerships
531 
438 
Partially-owned investment companies
904 
688 
Life insurance policies
127 
118 
Policy loans
143 
54 
Trading Securities
194 
37 
Other
37 
28 
Other investments at fair value
2,314 
1,692 
Cost [Member]
 
 
Schedule of Cost-method Investments [Line Items]
 
 
Investment funds
277 
232 
Limited partnerships
429 
356 
Partially-owned investment companies
904 
688 
Life insurance policies
127 
118 
Policy loans
143 
54 
Trading Securities
195 
35 
Other
37 
28 
Other investment at cost
$ 2,112 
$ 1,511 
Investments (Schedule Of Investment In Partially-Owned Insurance Companies) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Schedule Of Investments In Partially-Owned Insurance Companies [Line Items]
 
 
Investments in partially-owned insurance companies, Carrying Value
$ 380 
$ 360 
Investments in partially-owned insurance companies, Issued Share Capital
716 
445 
Domicile Bermuda [Member] |
Freisenbruch-Meyer [Member]
 
 
Schedule Of Investments In Partially-Owned Insurance Companies [Line Items]
 
 
Investments in partially-owned insurance companies, Carrying Value
Investments in partially-owned insurance companies, Issued Share Capital
Investments in partially-owned insurance companies, Ownership Percentage
40.00% 
40.00% 
Domicile Saudi Arabia [Member] |
ACE Cooperative Ins. Co. Saudi Arabia [Member]
 
 
Schedule Of Investments In Partially-Owned Insurance Companies [Line Items]
 
 
Investments in partially-owned insurance companies, Carrying Value
Investments in partially-owned insurance companies, Issued Share Capital
27 
27 
Investments in partially-owned insurance companies, Ownership Percentage
30.00% 
30.00% 
Domicile China [Member] |
Huatai Insurance Company [Member]
 
 
Schedule Of Investments In Partially-Owned Insurance Companies [Line Items]
 
 
Investments in partially-owned insurance companies, Carrying Value
241 
229 
Investments in partially-owned insurance companies, Issued Share Capital
457 
207 
Investments in partially-owned insurance companies, Ownership Percentage
20.00% 
21.30% 
Domicile China [Member] |
Huatai Life Insurance Company [Member]
 
 
Schedule Of Investments In Partially-Owned Insurance Companies [Line Items]
 
 
Investments in partially-owned insurance companies, Carrying Value
118 
112 
Investments in partially-owned insurance companies, Issued Share Capital
196 
179 
Investments in partially-owned insurance companies, Ownership Percentage
20.00% 
20.00% 
Domicile Russia [Member] |
Russian Reinsurance Company [Member]
 
 
Schedule Of Investments In Partially-Owned Insurance Companies [Line Items]
 
 
Investments in partially-owned insurance companies, Carrying Value
 
Investments in partially-owned insurance companies, Issued Share Capital
 
Investments in partially-owned insurance companies, Ownership Percentage
23.30% 
 
Domicile Cayman Islands [Member] |
Island Heritage [Member]
 
 
Schedule Of Investments In Partially-Owned Insurance Companies [Line Items]
 
 
Investments in partially-owned insurance companies, Carrying Value
Investments in partially-owned insurance companies, Issued Share Capital
$ 27 
$ 27 
Investments in partially-owned insurance companies, Ownership Percentage
10.80% 
10.80% 
Investments (Aggregate Fair Value And Gross Unrealized Loss By Length Of Time The Security Has Continuously Been In An Unrealized Loss Position) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Investment [Line Items]
 
 
Investment securities, Unrealized loss position, 0-12 Months, Fair Value
$ 5,927 
$ 13,956 
Investment securities, Unrealized loss position, 0-12 Months, Gross Unrealized Loss
(288.9)
(302.8)
Investment securities, Unrealized loss position, Over 12 Months, Fair Value
1,481 
1,696 
Investment securities, Unrealized loss position, Over 12 Months, Gross Unrealized Loss
(245.9)
(258.8)
Investment securities, Unrealized loss position, Total Fair Value
7,408 
15,652 
Investment securities, Unrealized loss position, Total Gross Unrealized Loss
(534.8)
(561.6)
U.S. Treasury And Agency [Member]
 
 
Investment [Line Items]
 
 
Investment securities, Unrealized loss position, 0-12 Months, Fair Value
 
864 
Investment securities, Unrealized loss position, 0-12 Months, Gross Unrealized Loss
 
(24.6)
Investment securities, Unrealized loss position, Over 12 Months, Fair Value
 
   
Investment securities, Unrealized loss position, Over 12 Months, Gross Unrealized Loss
 
   
Investment securities, Unrealized loss position, Total Fair Value
 
864 
Investment securities, Unrealized loss position, Total Gross Unrealized Loss
 
(24.6)
Foreign [Member]
 
 
Investment [Line Items]
 
 
Investment securities, Unrealized loss position, 0-12 Months, Fair Value
1,801 
4,409 
Investment securities, Unrealized loss position, 0-12 Months, Gross Unrealized Loss
(82.2)
(79.0)
Investment securities, Unrealized loss position, Over 12 Months, Fair Value
529 
312 
Investment securities, Unrealized loss position, Over 12 Months, Gross Unrealized Loss
(40.0)
(37.6)
Investment securities, Unrealized loss position, Total Fair Value
2,330 
4,721 
Investment securities, Unrealized loss position, Total Gross Unrealized Loss
(122.2)
(116.6)
Corporate Securities [Member]
 
 
Investment [Line Items]
 
 
Investment securities, Unrealized loss position, 0-12 Months, Fair Value
3,084 
3,553 
Investment securities, Unrealized loss position, 0-12 Months, Gross Unrealized Loss
(148.2)
(85.1)
Investment securities, Unrealized loss position, Over 12 Months, Fair Value
268 
273 
Investment securities, Unrealized loss position, Over 12 Months, Gross Unrealized Loss
(32.2)
(43.9)
Investment securities, Unrealized loss position, Total Fair Value
3,352 
3,826 
Investment securities, Unrealized loss position, Total Gross Unrealized Loss
(180.4)
(129.0)
Mortgage-Backed Securities [Member]
 
 
Investment [Line Items]
 
 
Investment securities, Unrealized loss position, 0-12 Months, Fair Value
440 
3,904 
Investment securities, Unrealized loss position, 0-12 Months, Gross Unrealized Loss
(7.5)
(67.3)
Investment securities, Unrealized loss position, Over 12 Months, Fair Value
586 
1,031 
Investment securities, Unrealized loss position, Over 12 Months, Gross Unrealized Loss
(170.2)
(165.1)
Investment securities, Unrealized loss position, Total Fair Value
1,026 
4,935 
Investment securities, Unrealized loss position, Total Gross Unrealized Loss
(177.7)
(232.4)
States, Municipalities, And Political Subdivisions [Member]
 
 
Investment [Line Items]
 
 
Investment securities, Unrealized loss position, 0-12 Months, Fair Value
30 
1,115 
Investment securities, Unrealized loss position, 0-12 Months, Gross Unrealized Loss
(0.4)
(36.2)
Investment securities, Unrealized loss position, Over 12 Months, Fair Value
98 
79 
Investment securities, Unrealized loss position, Over 12 Months, Gross Unrealized Loss
(3.5)
(11.9)
Investment securities, Unrealized loss position, Total Fair Value
128 
1,194 
Investment securities, Unrealized loss position, Total Gross Unrealized Loss
(3.9)
(48.1)
Total Fixed Maturities [Member]
 
 
Investment [Line Items]
 
 
Investment securities, Unrealized loss position, 0-12 Months, Fair Value
5,355 
13,845 
Investment securities, Unrealized loss position, 0-12 Months, Gross Unrealized Loss
(238.3)
(292.2)
Investment securities, Unrealized loss position, Over 12 Months, Fair Value
1,481 
1,695 
Investment securities, Unrealized loss position, Over 12 Months, Gross Unrealized Loss
(245.9)
(258.5)
Investment securities, Unrealized loss position, Total Fair Value
6,836 
15,540 
Investment securities, Unrealized loss position, Total Gross Unrealized Loss
(484.2)
(550.7)
Equity Securities [Member]
 
 
Investment [Line Items]
 
 
Investment securities, Unrealized loss position, 0-12 Months, Fair Value
484 
45 
Investment securities, Unrealized loss position, 0-12 Months, Gross Unrealized Loss
(42.3)
(1.9)
Investment securities, Unrealized loss position, Over 12 Months, Fair Value
 
Investment securities, Unrealized loss position, Over 12 Months, Gross Unrealized Loss
 
(0.3)
Investment securities, Unrealized loss position, Total Fair Value
484 
46 
Investment securities, Unrealized loss position, Total Gross Unrealized Loss
(42.3)
(2.2)
Other Investments [Member]
 
 
Investment [Line Items]
 
 
Investment securities, Unrealized loss position, 0-12 Months, Fair Value
88 
66 
Investment securities, Unrealized loss position, 0-12 Months, Gross Unrealized Loss
(8.3)
(8.7)
Investment securities, Unrealized loss position, Over 12 Months, Fair Value
 
   
Investment securities, Unrealized loss position, Over 12 Months, Gross Unrealized Loss
 
   
Investment securities, Unrealized loss position, Total Fair Value
88 
66 
Investment securities, Unrealized loss position, Total Gross Unrealized Loss
$ (8.3)
$ (8.7)
Investments (Schedule Of Sources Of Net Investment Income) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Sep. 30, 2010
Jun. 30, 2010
Mar. 31, 2010
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Investments [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities
 
 
 
 
 
 
 
 
$ 2,196 
$ 2,071 
$ 1,985 
Short-term investments
 
 
 
 
 
 
 
 
43 
34 
38 
Equity securities
 
 
 
 
 
 
 
 
36 
26 
54 
Other
 
 
 
 
 
 
 
 
62 
44 
48 
Gross investment income
 
 
 
 
 
 
 
 
2,337 
2,175 
2,125 
Investment expenses
 
 
 
 
 
 
 
 
(95)
(105)
(94)
Net investment income
$ 565 
$ 564 
$ 569 
$ 544 
$ 532 
$ 516 
$ 518 
$ 504 
$ 2,242 
$ 2,070 
$ 2,031 
Investments (Schedule Of Components Of Restricted Assets) (Details) (USD $)
Dec. 31, 2011
Dec. 31, 2010
Investments [Abstract]
 
 
Trust funds
$ 9,940,000,000 
$ 8,200,000,000 
Deposits with non-U.S. regulatory authorities
2,240,000,000 
2,289,000,000 
Deposits with U.S. regulatory authorities
1,307,000,000 
1,384,000,000 
Other pledged assets
1,615,000,000 1
1,190,000,000 1
Total restricted assets
15,102,000,000 
13,063,000,000 
Restricted assets
$ 1,300,000,000 
$ 1,000,000,000 
Fair Value Measurements (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
years
Dec. 31, 2010
Fair Value Measurements [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
 
GLB - Adjustment factor for valuable guarantees - lower
15.00% 
 
GLB - Adjustment factor for valuable guarantees - upper
75.00% 
 
GLB - Maximum annuitization rate
8.00% 
 
GLB - Maximum annuitization rate in the first year a policy can annuitize utilizing the GMIB
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% 
 
GLB - Number of different annuitization functions used
 
Minimum number of pricing services used to obtain fair value measurements for the majority of the investment securities held
 
The maximum maturity period in years to be classified as a short-term investment
 
Impact of GMIB valuation model changes on net income
$ 14.0 
$ 98.0 
Redemption Notice Periods Lower Range [Member]
 
 
Fair Value Measurements [Line Items]
 
 
Notice period for redemption for alternative investments investment funds, days
 
Redemption Notice Periods Upper Range [Member]
 
 
Fair Value Measurements [Line Items]
 
 
Notice period for redemption for alternative investments investment funds, days
120 
 
Fair Value Measurements (Financial Instruments Measured At Fair Value On A Recurring Basis) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
$ 41,967 
$ 37,539 
Equity securities at fair value
647 
692 
Short-term investments at fair value
2,301 
1,983 
Other investments at fair value
2,314 
1,692 
Securities lending collateral
1,375 
1,495 
Investment derivative instruments
10 
11 
Other derivative instruments
41 
25 
Separate account assets fair value
660 
308 
Total assets measured at fair value
49,315 
43,745 
GLB
1,319 1
507 1
Level 1 [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
1,923 
1,782 
Equity securities at fair value
632 
676 
Short-term investments at fair value
1,246 
903 
Other investments at fair value
208 
39 
Investment derivative instruments
10 
11 
Other derivative instruments
(16)
(25)
Separate account assets fair value
607 
308 
Total assets measured at fair value
4,610 
3,694 
Level 2 [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
39,843 
35,575 
Equity securities at fair value
Short-term investments at fair value
1,055 
1,080 
Other investments at fair value
229 
221 
Securities lending collateral
1,375 
1,495 
Other derivative instruments
54 
46 
Separate account assets fair value
53 
 
Total assets measured at fair value
42,611 
38,420 
Level 3 [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
201 
182 
Equity securities at fair value
13 
13 
Other investments at fair value
1,877 
1,432 
Other derivative instruments
Total assets measured at fair value
2,094 
1,631 
GLB
1,319 1
507 1
U.S. Treasury And Agency [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
2,960 
2,963 
U.S. Treasury And Agency [Member] |
Level 1 [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
1,691 
1,564 
U.S. Treasury And Agency [Member] |
Level 2 [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
1,264 
1,399 
U.S. Treasury And Agency [Member] |
Level 3 [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
 
Foreign [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
12,401 
11,186 
Foreign [Member] |
Level 1 [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
212 
187 
Foreign [Member] |
Level 2 [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
12,156 
10,973 
Foreign [Member] |
Level 3 [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
33 
26 
Corporate Securities [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
14,693 
13,587 
Corporate Securities [Member] |
Level 1 [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
20 
31 
Corporate Securities [Member] |
Level 2 [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
14,539 
13,441 
Corporate Securities [Member] |
Level 3 [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
134 
115 
Mortgage-Backed Securities [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
10,201 
8,516 
Mortgage-Backed Securities [Member] |
Level 2 [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
10,173 
8,477 
Mortgage-Backed Securities [Member] |
Level 3 [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
28 
39 
States, Municipalities, And Political Subdivisions [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
1,712 
1,287 
States, Municipalities, And Political Subdivisions [Member] |
Level 2 [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
1,711 
1,285 
States, Municipalities, And Political Subdivisions [Member] |
Level 3 [Member]
 
 
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
 
 
Fixed maturities available for sale at fair value
$ 1 
$ 2 
Fair Value Measurements (Fair Value And Maximum Future Funding Commitments Relating To Included In Other Investments) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Liquidation Period Lower Range [Member]
years
Dec. 31, 2011
Liquidation Period Upper Range [Member]
years
Dec. 31, 2011
Fair Value [Member]
Dec. 31, 2010
Fair Value [Member]
Dec. 31, 2011
Maximum Future Funding Commitments [Member]
Dec. 31, 2010
Maximum Future Funding Commitments [Member]
Fair Value And Maximum Future Funding Commitments Related To Investments [Line Items]
 
 
 
 
 
 
Financial
 
 
$ 205 
$ 192 
$ 141 
$ 151 
Real estate
 
 
270 
163 
96 
92 
Distressed
 
 
182 
243 
57 
43 
Mezzanine
 
 
195 
125 
282 
173 
Traditional
 
 
565 
376 
200 
291 
Vintage
 
 
18 
27 
Investment funds
 
 
378 
329 
 
 
Alternative investments total
 
 
$ 1,813 
$ 1,455 
$ 777 
$ 753 
Liquidation period for financial alternative investments (in years)
 
 
 
 
Liquidation period for real estate alternative investments (in years)
 
 
 
 
Liquidation period for distressed alternative investments (in years)
 
 
 
 
Liquidation period for mezzanine alternative investments (in years)
 
 
 
 
Liquidation period for traditional alternative investments (in years)
 
 
 
 
Liquidation period for vintage alternative investments (in years)
 
 
 
 
Fair Value Measurements (Financial Instruments Measured At Fair Value Using Significant Unobservable Inputs) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended 12 Months Ended
Dec. 31, 2009
Dec. 31, 2011
Equity Securities [Member]
Dec. 31, 2010
Equity Securities [Member]
Dec. 31, 2009
Equity Securities [Member]
Dec. 31, 2011
Other Investments [Member]
Dec. 31, 2010
Other Investments [Member]
Dec. 31, 2009
Other Investments [Member]
Dec. 31, 2011
Other Derivative Instruments [Member]
Dec. 31, 2010
Other Derivative Instruments [Member]
Dec. 31, 2009
Other Derivative Instruments [Member]
Dec. 31, 2011
Guaranteed Minimum Income Benefit [Member]
Dec. 31, 2010
Guaranteed Minimum Income Benefit [Member]
Dec. 31, 2009
Guaranteed Minimum Income Benefit [Member]
Dec. 31, 2008
Guaranteed Minimum Income Benefit [Member]
Dec. 31, 2011
Fixed Maturities Available For Sale [Member]
U.S. Treasury And Agency [Member]
Dec. 31, 2011
Fixed Maturities Available For Sale [Member]
Foreign [Member]
Dec. 31, 2010
Fixed Maturities Available For Sale [Member]
Foreign [Member]
Dec. 31, 2009
Fixed Maturities Available For Sale [Member]
Foreign [Member]
Dec. 31, 2011
Fixed Maturities Available For Sale [Member]
Corporate Securities [Member]
Dec. 31, 2010
Fixed Maturities Available For Sale [Member]
Corporate Securities [Member]
Dec. 31, 2009
Fixed Maturities Available For Sale [Member]
Corporate Securities [Member]
Dec. 31, 2011
Fixed Maturities Available For Sale [Member]
Mortgage-Backed Securities [Member]
Dec. 31, 2010
Fixed Maturities Available For Sale [Member]
Mortgage-Backed Securities [Member]
Dec. 31, 2009
Fixed Maturities Available For Sale [Member]
Mortgage-Backed Securities [Member]
Dec. 31, 2011
Fixed Maturities Available For Sale [Member]
States, Municipalities, And Political Subdivisions [Member]
Dec. 31, 2010
Fixed Maturities Available For Sale [Member]
States, Municipalities, And Political Subdivisions [Member]
Dec. 31, 2008
Fixed Maturities Available For Sale [Member]
States, Municipalities, And Political Subdivisions [Member]
Fair Value Measurements [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance-Beginning of year, Assets
 
$ 13 
$ 12 
$ 21 
$ 1,432 
$ 1,149 
$ 1,099 
$ 4 
$ 14 
$ 87 
 
 
 
 
 
$ 26 
$ 59 
$ 45 
$ 115 
$ 168 
$ 117 
$ 39 
$ 21 
$ 109 
$ 2 
$ 3 
$ 3 
Transfers into Level 3, Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
42 
 
 
 
 
 
 
 
Transfers into (out of) Level 3, Assets
 
 
 
 
 
(30)
 
 
 
 
 
 
 
 
 
(14)
 
(25)
 
(1)
(37)
 
 
 
Transfers out of Level 3, Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(18)
 
 
(4)
 
 
(48)
 
 
 
 
 
Changes in Net Unrealized Gains (Losses) included in OCI, Assets
 
(1)
 
93 
53 
191 
 
 
 
 
 
 
 
 
(1)
(2)
17 
 
 
12 
 
 
 
Net Realized Gains/Losses, Assets
 
 
(3)
(7)
(149)
(71)
 
 
 
 
 
 
(1)
(3)
(3)
 
 
(2)
 
 
 
Purchases, Sales, Issuances, and Settlements, Net, Assets
 
 
(1)
(18)
 
237 
38 
 
(12)
(2)
 
 
 
 
 
 
(21)
 
(34)
25 
 
19 
(61)
 
(1)
 
Sales, Assets
 
(8)
 
 
(55)
 
 
 
 
 
 
 
 
 
 
(3)
 
 
(27)
 
 
(17)
 
 
 
 
 
Purchases, Assets
 
 
 
602 
 
 
 
 
 
 
 
 
 
23 
 
 
32 
 
 
59 
 
 
 
 
 
Settlements, Assets
 
 
 
 
(192)
 
 
(3)
 
 
 
 
 
 
 
(3)
 
 
(19)
 
 
(9)
 
 
(1)
 
 
Balance-End of year, Assets
 
13 
13 
12 
1,877 
1,432 
1,149 
14 
 
 
 
 
33 
26 
59 
134 
115 
168 
28 
39 
21 
Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet Date, Assets
 
 
 
 
(3)
(7)
(149)
(1)
(71)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported liabilities
 
 
 
 
 
 
 
 
 
 
 
 
559 
910 
 
 
 
 
 
 
 
 
 
 
 
 
 
Guaranteed minimum benefits fair value derivative adjustment in liability
 
 
 
 
 
 
 
 
 
 
 
507 
443 
811 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance-Beginning of year, Liabilities
811 1
 
 
 
 
 
 
 
 
 
507 2 3
443 2
 2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net realized gains/losses, Liabilities
(368)1
 
 
 
 
 
 
 
 
 
812 3
64 2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance-End of year, Liabilities
443 1
 
 
 
 
 
 
 
 
 
1,319 3
507 2 3
 2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet Date, Liabilities
$ (368)1
 
 
 
 
 
 
 
 
 
$ 812 3
$ 64 2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value Measurements (Carrying Values And Fair Values For Financial Instruments Not Measured At Fair Value) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
 
 
Long-term debt
$ 3,360 
$ 3,358 
Trust preferred securities
309 
309 
Total liabilities
62,989 
60,381 
Financial Instruments Carrying Value [Member]
 
 
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
 
 
Fixed Maturities Held To Maturity Not Measured At Fair Value
8,447 
9,501 
Short-term debt
1,251 
1,300 
Long-term debt
3,360 
3,358 
Trust preferred securities
309 
309 
Total liabilities
4,920 
4,967 
Financial Instruments Fair Value [Member]
 
 
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
 
 
Fixed Maturities Held To Maturity Not Measured At Fair Value
8,605 
9,461 
Short-term debt
1,251 
1,300 
Long-term debt
3,823 
3,690 
Trust preferred securities
404 
364 
Total liabilities
5,478 
5,354 
U.S. Treasury And Agency [Member] |
Financial Instruments Carrying Value [Member]
 
 
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
 
 
Fixed Maturities Held To Maturity Not Measured At Fair Value
1,078 
1,105 
U.S. Treasury And Agency [Member] |
Financial Instruments Fair Value [Member]
 
 
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
 
 
Fixed Maturities Held To Maturity Not Measured At Fair Value
1,126 
1,127 
Foreign [Member] |
Financial Instruments Carrying Value [Member]
 
 
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
 
 
Fixed Maturities Held To Maturity Not Measured At Fair Value
935 
1,049 
Foreign [Member] |
Financial Instruments Fair Value [Member]
 
 
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
 
 
Fixed Maturities Held To Maturity Not Measured At Fair Value
930 
1,013 
Corporate Securities [Member] |
Financial Instruments Carrying Value [Member]
 
 
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
 
 
Fixed Maturities Held To Maturity Not Measured At Fair Value
2,338 
2,361 
Corporate Securities [Member] |
Financial Instruments Fair Value [Member]
 
 
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
 
 
Fixed Maturities Held To Maturity Not Measured At Fair Value
2,337 
2,313 
Mortgage-Backed Securities [Member] |
Financial Instruments Carrying Value [Member]
 
 
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
 
 
Fixed Maturities Held To Maturity Not Measured At Fair Value
2,949 
3,811 
Mortgage-Backed Securities [Member] |
Financial Instruments Fair Value [Member]
 
 
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
 
 
Fixed Maturities Held To Maturity Not Measured At Fair Value
3,036 
3,846 
States, Municipalities, And Political Subdivisions [Member] |
Financial Instruments Carrying Value [Member]
 
 
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
 
 
Fixed Maturities Held To Maturity Not Measured At Fair Value
1,147 
1,175 
States, Municipalities, And Political Subdivisions [Member] |
Financial Instruments Fair Value [Member]
 
 
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
 
 
Fixed Maturities Held To Maturity Not Measured At Fair Value
$ 1,176 
$ 1,162 
Reinsurance (Narrative) (Details) (USD $)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Guaranteed Minimum Benefits [Line Items]
 
 
 
Reinsurance recoveries on incurred losses and loss expenses
$ 3,300,000,000 
$ 3,300,000,000 
$ 3,700,000,000 
Provision for uncollectible reinsurance
479,000,000 
530,000,000 
 
Guaranteed Minimum Death Benefits [Member]
 
 
 
Guaranteed Minimum Benefits [Line Items]
 
 
 
Reported liabilities
138,000,000 
185,000,000 
 
Net amount at risk
1,800,000,000 
1,800,000,000 
 
Discounting assumption used in the calculation of the benefit reserve aging - lower range
1.50% 
 
 
Discounting assumption used in the calculation of the benefit reserve aging - upper range
2.50% 
 
 
Percent of Annuity 2000 mortality table used for mortality assumption
100.00% 
 
 
Total claim amount payable, if all of the Company's cedants' policyholders covered were to die immediately
400,000,000 
 
 
Guaranteed Living Benefits [Member]
 
 
 
Guaranteed Minimum Benefits [Line Items]
 
 
 
Reported liabilities
1,500,000,000 
648,000,000 
 
Fair value derivative adjustment in liability
1,300,000,000 
507,000,000 
 
Net amount at risk
380,000,000 
30,000,000 
 
Discounting assumption used in the calculation of the benefit reserve aging - lower range
3.00% 
 
 
Discounting assumption used in the calculation of the benefit reserve aging - upper range
4.00% 
 
 
Percent of Annuity 2000 mortality table used for mortality assumption
100.00% 
 
 
Total claim amount payable, if all of the Company's cedants' policyholders covered were to die immediately
1,100,000,000 
 
 
Average attained age of all policyholders under all benefits reinsured, years
67 
 
 
Guaranteed Minimum Deaths Benefits And Guaranteed Living Benefits [Member]
 
 
 
Guaranteed Minimum Benefits [Line Items]
 
 
 
GMBD net amount of risk
182,000,000 
145,000,000 
 
GLB net amount of risk
998,000,000 
619,000,000 
 
Discounting assumption used in the calculation of the benefit reserve aging - lower range
1.00% 
 
 
Discounting assumption used in the calculation of the benefit reserve aging - upper range
2.00% 
 
 
Percent of Annuity 2000 mortality table used for mortality assumption
100.00% 
 
 
GLB policyholders claims
$ 0 
 
 
Reinsurance (Direct, Assumed, And Ceded Premiums) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Sep. 30, 2010
Jun. 30, 2010
Mar. 31, 2010
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Reinsurance [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Direct premiums written
 
 
 
 
 
 
 
 
$ 17,626 
$ 15,887 
$ 15,467 
Assumed premiums written
 
 
 
 
 
 
 
 
3,205 
3,624 
3,697 
Ceded premiums written
 
 
 
 
 
 
 
 
(5,459)
(5,803)
(5,865)
Net premiums written
 
 
 
 
 
 
 
 
15,372 
13,708 
13,299 
Direct premiums earned
 
 
 
 
 
 
 
 
17,534 
15,780 
15,415 
Assumed premiums earned
 
 
 
 
 
 
 
 
3,349 
3,516 
3,768 
Ceded premiums earned
 
 
 
 
 
 
 
 
(5,496)
(5,792)
(5,943)
Net premiums earned
$ 3,831 
$ 4,490 
$ 3,757 
$ 3,309 
$ 3,572 
$ 3,422 
$ 3,233 
$ 3,277 
$ 15,387 
$ 13,504 
$ 13,240 
Reinsurance (Composition Of Reinsurance Recoverable On Losses And Loss Expenses) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2008
Reinsurance [Abstract]
 
 
 
 
Reinsurance recoverable on unpaid losses and loss expenses, net of a provision for uncollectible reinsurance
$ 11,602 
$ 12,149 1
$ 12,745 1
$ 12,935 1
Reinsurance recoverable on paid losses and loss expenses, net of a provision for uncollectible reinsurance
787 
722 
 
 
Net reinsurance recoverable on losses and loss expenses
$ 12,389 
$ 12,871 
 
 
Reinsurance (Reinsurance Recoverable By Category And Listing Of Largest Reinsurers) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Reinsurance Recoverable On Ceded Reinsurance [Line Items]
 
 
Gross reinsurance recoverable
$ 12,868 
 
Provision for uncollectible reinsurance
479 
530 
Provision for uncollectible reinsurance as a percentage of gross reinsurance recoverable
3.70% 
 
Reinsurance Largest Reinsurers [Member]
 
 
Reinsurance Recoverable On Ceded Reinsurance [Line Items]
 
 
Gross reinsurance recoverable
6,230 
 
Provision for uncollectible reinsurance
109 
 
Provision for uncollectible reinsurance as a percentage of gross reinsurance recoverable
1.70% 
 
Reinsurance Other Reinsurers Balances Rated A- Or Better [Member]
 
 
Reinsurance Recoverable On Ceded Reinsurance [Line Items]
 
 
Gross reinsurance recoverable
3,109 
 
Provision for uncollectible reinsurance
57 
 
Provision for uncollectible reinsurance as a percentage of gross reinsurance recoverable
1.80% 
 
Reinsurance Other Reinsurers Balances With Ratings Lower Than A- Or Not Rated [Member]
 
 
Reinsurance Recoverable On Ceded Reinsurance [Line Items]
 
 
Gross reinsurance recoverable
667 
 
Provision for uncollectible reinsurance
108 
 
Provision for uncollectible reinsurance as a percentage of gross reinsurance recoverable
16.20% 
 
Reinsurance Other Pools And Government Agencies [Member]
 
 
Reinsurance Recoverable On Ceded Reinsurance [Line Items]
 
 
Gross reinsurance recoverable
122 
 
Provision for uncollectible reinsurance
 
Provision for uncollectible reinsurance as a percentage of gross reinsurance recoverable
6.60% 
 
Reinsurance Structured Settlements [Member]
 
 
Reinsurance Recoverable On Ceded Reinsurance [Line Items]
 
 
Gross reinsurance recoverable
585 
 
Provision for uncollectible reinsurance
22 
 
Provision for uncollectible reinsurance as a percentage of gross reinsurance recoverable
3.80% 
 
Reinsurance Other Captives [Member]
 
 
Reinsurance Recoverable On Ceded Reinsurance [Line Items]
 
 
Gross reinsurance recoverable
1,842 
 
Provision for uncollectible reinsurance
37 
 
Provision for uncollectible reinsurance as a percentage of gross reinsurance recoverable
2.00% 
 
Reinsurance Other [Member]
 
 
Reinsurance Recoverable On Ceded Reinsurance [Line Items]
 
 
Gross reinsurance recoverable
313 
 
Provision for uncollectible reinsurance
$ 138 
 
Provision for uncollectible reinsurance as a percentage of gross reinsurance recoverable
44.10% 
 
Reinsurance (Income And Expenses Relating To GMDB And GLB Reinsurance) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Sep. 30, 2010
Jun. 30, 2010
Mar. 31, 2010
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Guaranteed Minimum Benefits [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums earned
$ 3,831 
$ 4,490 
$ 3,757 
$ 3,309 
$ 3,572 
$ 3,422 
$ 3,233 
$ 3,277 
$ 15,387 
$ 13,504 
$ 13,240 
Policy benefits and other reserve adjustments
119 
83 
108 
91 
90 
93 
87 
87 
401 
357 
325 
Net realized gains (losses)
83 
(760)
(73)
(45)
305 
(50)
168 
(795)
432 
(196)
Guaranteed Minimum Death Benefits [Member]
 
 
 
 
 
 
 
 
 
 
 
Guaranteed Minimum Benefits [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums earned
 
 
 
 
 
 
 
 
98 
109 
104 
Policy benefits and other reserve adjustments
 
 
 
 
 
 
 
 
59 
99 
111 
Guaranteed Living Benefits [Member]
 
 
 
 
 
 
 
 
 
 
 
Guaranteed Minimum Benefits [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums earned
 
 
 
 
 
 
 
 
163 
164 
159 
Policy benefits and other reserve adjustments
 
 
 
 
 
 
 
 
47 
29 
20 
Net realized gains (losses)
 
 
 
 
 
 
 
 
(812)
(64)
368 
(Loss) gain recognized in income
 
 
 
 
 
 
 
 
(696)
71 
507 
Net cash received
 
 
 
 
 
 
 
 
161 
160 
156 
Net (increase) decrease in liability
 
 
 
 
 
 
 
 
$ (857)
$ (89)
$ 351 
Intangible Assets (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Intangible Assets [Line Items]
 
 
 
Goodwill
$ 4,180 
$ 4,030 
$ 3,814 
Other intangible assets
651 
 
 
Intangible assets subject to amortization
558 
 
 
Intangible assets not subject to amortization
93 
 
 
Amortization expense related to other intangible assets
29 
11 
Minimum [Member]
 
 
 
Intangible Assets [Line Items]
 
 
 
Amortization expense related to future intangible assets
31 
 
 
Maximum [Member]
 
 
 
Intangible Assets [Line Items]
 
 
 
Amortization expense related to future intangible assets
$ 43 
 
 
Intangible Assets (Roll-Forward Of Goodwill By Business Segment) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended 12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2010
Rain And Hail [Member]
Dec. 31, 2010
Jerneh [Member]
Dec. 31, 2011
New York Life's Korea And Hong Kong [Member]
Dec. 31, 2011
PMHC [Member]
Dec. 31, 2011
Rio Guayas [Member]
Dec. 31, 2011
Insurance - North American [Member]
Dec. 31, 2010
Insurance - North American [Member]
Dec. 31, 2010
Insurance - North American [Member]
Rain And Hail [Member]
Dec. 31, 2011
Insurance - North American [Member]
PMHC [Member]
Dec. 31, 2011
Insurance - Overseas General [Member]
Dec. 31, 2010
Insurance - Overseas General [Member]
Dec. 31, 2010
Insurance - Overseas General [Member]
Jerneh [Member]
Dec. 31, 2011
Insurance - Overseas General [Member]
Rio Guayas [Member]
Dec. 31, 2011
Global Reinsurance [Member]
Dec. 31, 2010
Global Reinsurance [Member]
Dec. 31, 2009
Global Reinsurance [Member]
Dec. 31, 2011
Life [Member]
Dec. 31, 2010
Life [Member]
Dec. 31, 2011
Life [Member]
New York Life's Korea And Hong Kong [Member]
Intangible Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Balance
$ 4,030 
$ 3,814 
 
 
 
 
 
$ 1,351 
$ 1,205 
 
 
$ 1,564 
$ 1,497 
 
 
$ 365 
$ 365 
$ 365 
$ 750 
$ 747 
 
Acquisition
 
 
135 
94 
121 
11 
31 
 
 
135 
11 
 
 
94 
31 
 
 
 
 
 
121 
Purchase price allocation adjustment
(7)
 
 
 
 
 
(12)
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange revaluation and other
(6)
(16)
 
 
 
 
 
 
11 
 
 
(27)
 
 
 
 
 
(9)
 
 
Ending Balance
$ 4,180 
$ 4,030 
 
 
 
 
 
$ 1,350 
$ 1,351 
 
 
$ 1,603 
$ 1,564 
 
 
$ 365 
$ 365 
$ 365 
$ 862 
$ 750 
 
Intangible Assets (Roll-Forward Value Of Business Acquired) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Balance, beginning of year
$ 634 
$ 748 
$ 823 
Amortization expense
(105)
(111)
(130)
Foreign exchange revaluation
(1)
(3)
55 
Balance, end of year
648 
634 
748 
New York Life's Korea And Hong Kong [Member]
 
 
 
Acquisition of New York Life's Korea operations and Hong Kong operations
$ 120 
 
 
Unpaid Losses And Loss Expenses (Narrative) (Details) (USD $)
12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Jun. 30, 2010
Dec. 31, 2004
Jun. 30, 2010
LOB Brandywine Run Off [Member]
Dec. 31, 2011
Insurance - North American [Member]
Dec. 31, 2010
Insurance - North American [Member]
Dec. 31, 2009
Insurance - North American [Member]
Dec. 31, 2008
Insurance - North American [Member]
Dec. 31, 2011
Insurance - North American [Member]
Run Off [Member]
Dec. 31, 2010
Insurance - North American [Member]
Run Off [Member]
Dec. 31, 2010
Insurance - North American [Member]
LOB Brandywine And Westchester Specialty Run Off [Member]
Underwriting Period Reserve Review [Member]
Run Off [Member]
Dec. 31, 2011
Insurance - North American [Member]
LOB Completion Of Reserve Review [Member]
Underwriting Period 2011 [Member]
Run Off [Member]
Dec. 31, 2011
Insurance - North American [Member]
Short Tail [Member]
Dec. 31, 2010
Insurance - North American [Member]
Short Tail [Member]
Active [Member]
Dec. 31, 2010
Insurance - North American [Member]
Short Tail [Member]
LOB Crop Hail [Member]
Underwriting Period 2009 And Prior [Member]
Dec. 31, 2011
Insurance - North American [Member]
Short Tail [Member]
LOB Property [Member]
Underwriting Period 2009 To 2010 [Member]
Dec. 31, 2010
Insurance - North American [Member]
Short Tail [Member]
LOB Other Lines [Member]
Underwriting Period 2007 To 2009 [Member]
Dec. 31, 2011
Insurance - North American [Member]
Short Tail [Member]
LOB Other Lines [Member]
Underwriting Period Various [Member]
Dec. 31, 2011
Insurance - North American [Member]
Long Tail [Member]
Dec. 31, 2010
Insurance - North American [Member]
Long Tail [Member]
Dec. 31, 2010
Insurance - North American [Member]
Long Tail [Member]
Run Off [Member]
Dec. 31, 2009
Insurance - North American [Member]
Long Tail [Member]
Run Off [Member]
Dec. 31, 2011
Insurance - North American [Member]
Long Tail [Member]
LOB Excess Casualty [Member]
Underwriting Period 2005 And Prior [Member]
Dec. 31, 2010
Insurance - North American [Member]
Long Tail [Member]
LOB Excess Casualty [Member]
Underwriting Period 2007 [Member]
Dec. 31, 2010
Insurance - North American [Member]
Long Tail [Member]
LOB Workers Compensation [Member]
Underwriting Period 2008 [Member]
Dec. 31, 2010
Insurance - North American [Member]
Long Tail [Member]
LOB Brandywine And Westchester Specialty Run Off [Member]
Underwriting Period 1999 And Prior [Member]
Run Off [Member]
Dec. 31, 2010
Insurance - North American [Member]
Long Tail [Member]
LOB Brandywine And Westchester Specialty Run Off [Member]
Underwriting Period 2000 And Prior [Member]
Run Off [Member]
Dec. 31, 2011
Insurance - North American [Member]
Long Tail [Member]
LOB Brandywine And Westchester Specialty Run Off [Member]
Underwriting Period 2011 [Member]
Run Off [Member]
Dec. 31, 2010
Insurance - North American [Member]
Long Tail [Member]
LOB Financial Solutions [Member]
Underwriting Period 2000 And Prior [Member]
Dec. 31, 2011
Insurance - North American [Member]
Long Tail [Member]
LOB Financial Solutions [Member]
Underwriting Period 2002 To 2010 [Member]
Dec. 31, 2010
Insurance - North American [Member]
Long Tail [Member]
LOB Errors And Omission And Directors And Officers [Member]
Underwriting Period 2006 And Prior [Member]
Dec. 31, 2011
Insurance - North American [Member]
Long Tail [Member]
D & O Portfolio [Member]
Underwriting Period 2006 And Prior [Member]
Dec. 31, 2011
Insurance - North American [Member]
Long Tail [Member]
LOB Errors And Omissions Coverage [Member]
Underwriting Period 2007 To 2008 [Member]
Dec. 31, 2011
Insurance - North American [Member]
Long Tail [Member]
LOB Medical Risk Operations [Member]
Underwriting Period 2002 To 2010 [Member]
Dec. 31, 2010
Insurance - North American [Member]
Long Tail [Member]
LOB National Accounts [Member]
Underwriting Period 2005 And 2006 And 2009 [Member]
Dec. 31, 2011
Insurance - North American [Member]
Long Tail [Member]
LOB National Accounts [Member]
Underwriting Period 2002 To 2010 [Member]
Dec. 31, 2011
Insurance - North American [Member]
Long Tail [Member]
LOB Foreign Casualty Products [Member]
Underwriting Period 2007 And Prior [Member]
Dec. 31, 2011
Insurance - North American [Member]
Long Tail [Member]
LOB Surety Business [Member]
Underwriting Period 2007 [Member]
Dec. 31, 2011
Insurance - North American [Member]
Long Tail [Member]
LOB Environmental Liability Product Line [Member]
Underwriting Period 2005 To 2007 [Member]
Dec. 31, 2011
Insurance - North American [Member]
Long Tail [Member]
LOB Other Lines [Member]
Underwriting Period Various [Member]
Dec. 31, 2010
Insurance - North American [Member]
Long Tail [Member]
LOB Other Lines [Member]
Underwriting Period Various [Member]
Dec. 31, 2011
Insurance - North American [Member]
Long Tail [Member]
LOB Other Lines [Member]
Underwriting Period Various [Member]
Run Off [Member]
Dec. 31, 2011
Insurance - Overseas General [Member]
Dec. 31, 2010
Insurance - Overseas General [Member]
Dec. 31, 2009
Insurance - Overseas General [Member]
Dec. 31, 2008
Insurance - Overseas General [Member]
Dec. 31, 2011
Insurance - Overseas General [Member]
Short Tail [Member]
LOB Property [Member]
Underwriting Period 2007 To 2009 [Member]
Dec. 31, 2011
Insurance - Overseas General [Member]
Short Tail [Member]
LOB Property Energy Marine Accident And Health [Member]
Underwriting Period 2008 To 2009 [Member]
Dec. 31, 2011
Insurance - Overseas General [Member]
Long Tail [Member]
Dec. 31, 2010
Insurance - Overseas General [Member]
Long Tail [Member]
Dec. 31, 2010
Insurance - Overseas General [Member]
Long Tail [Member]
LOB Casualty And Financial Lines [Member]
Underwriting Period 2006 And Prior [Member]
Dec. 31, 2011
Insurance - Overseas General [Member]
Long Tail [Member]
LOB Casualty And Financial Lines [Member]
Underwriting Period 2007 And Prior [Member]
Dec. 31, 2010
Insurance - Overseas General [Member]
Long Tail [Member]
LOB Casualty And Financial Lines [Member]
Underwriting Period 2007 To 2009 [Member]
Dec. 31, 2011
Insurance - Overseas General [Member]
Long Tail [Member]
LOB Casualty And Financial Lines [Member]
Underwriting Period 2008 To 2010 [Member]
Dec. 31, 2011
Segment Global Reinsurance [Member]
Dec. 31, 2010
Segment Global Reinsurance [Member]
Dec. 31, 2009
Segment Global Reinsurance [Member]
Dec. 31, 2008
Segment Global Reinsurance [Member]
Dec. 31, 2011
Segment Global Reinsurance [Member]
Short Tail [Member]
Underwriting Period 2009 And Prior [Member]
Dec. 31, 2010
Segment Global Reinsurance [Member]
Short Tail [Member]
LOB Property And Trade Credit [Member]
Underwriting Period 2003 To 2008 [Member]
Dec. 31, 2011
Segment Global Reinsurance [Member]
Long Tail [Member]
Dec. 31, 2010
Segment Global Reinsurance [Member]
Long Tail [Member]
Dec. 31, 2010
Segment Global Reinsurance [Member]
Long Tail [Member]
Underwriting Period 2003 To 2006 [Member]
Dec. 31, 2011
Segment Global Reinsurance [Member]
Long Tail [Member]
Professional Liability, D & O, Casualty, And Medical Malpractice [Member]
Dec. 31, 2011
Brandywine [Member]
Dec. 31, 2010
Brandywine [Member]
Dec. 31, 2011
Westchester Specialty [Member]
Dec. 31, 1998
Westchester Specialty [Member]
Dec. 31, 2011
ACE Bermuda [Member]
Unpaid Losses And Loss Expenses [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net losses and loss expenses incurred, Prior years
$ (556,000,000)
$ (503,000,000)
$ (576,000,000)
 
 
 
$ 297,000,000 
$ 239,000,000 
$ 179,000,000 
 
 
 
$ 89,000,000 
$ 82,000,000 
$ 111,000,000 
$ 137,000,000 
$ 41,000,000 
$ 48,000,000 
$ 96,000,000 
$ 63,000,000 
$ 186,000,000 
$ 102,000,000 
$ 132,000,000 
 
$ 54,000,000 
$ 91,000,000 
$ 30,000,000 
$ 114,000,000 
$ 18,000,000 
$ 102,000,000 
$ 49,000,000 
$ 26,000,000 
$ 105,000,000 
$ 82,000,000 
$ 40,000,000 
$ 43,000,000 
$ 54,000,000 
$ 28,000,000 
$ 26,000,000 
$ 21,000,000 
$ 29,000,000 
$ 25,000,000 
$ 15,000,000 
$ 3,000,000 
$ 290,000,000 
$ 290,000,000 
$ 255,000,000 
 
$ 131,000,000 
$ 136,000,000 
$ 154,000,000 
$ 159,000,000 
$ 241,000,000 
$ 337,000,000 
$ 82,000,000 
$ 183,000,000 
$ 71,000,000 
$ 106,000,000 
$ 142,000,000 
 
$ 13,000,000 
$ 34,000,000 
$ 58,000,000 
$ 72,000,000 
$ 96,000,000 
$ 79,000,000 
 
 
 
 
 
Percent of prior period net unpaid reserves represented by prior period development
 
 
 
 
 
 
 
1.90% 
1.50% 
1.20% 
 
0.60% 
 
 
 
 
 
 
 
 
 
 
 
0.80% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.20% 
4.30% 
4.20% 
 
 
 
 
 
 
 
 
 
3.10% 
4.70% 
5.60% 
 
 
 
 
 
 
 
 
 
 
 
Unallocated loss adjustment expenses due to operating expenses paid and reserved
10,076,000,000 
8,082,000,000 
7,998,000,000 
 
 
 
 
 
 
 
17,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A&E - change in net loss reserves
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
76,000,000 
84,000,000 
6,000,000 
 
 
A&E - change in gross loss reserves
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
241,000,000 
247,000,000 
29,000,000 
 
 
A&E - loss reserves, net - closing
1,196,000,000 
1,335,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
83,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
909,000,000 
 
143,000,000 
 
61,000,000 
A&E net - incurred activity
104,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
59,000,000 
 
48,000,000 
 
 
NICO reinsurance protection on losses and loss expenses
2,500,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NICO % reinsurance protection on losses and loss expenses incurred on or before 12/31/96 net of retention
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
75.00% 
 
NICO reinsurance protection on losses and loss expenses incurred on or before 12/31/96 net of retention
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,000,000,000 
 
NICO retention for losses and loss expenses incurred on or before 12/31/96
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
721,000,000 
 
NICO pro-rata share of reinsurance protection before 12/31/92
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
85.00% 
 
NICO reinsurance protection on losses and loss expenses incurred on or before 12/31/92 net of retention
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
150,000,000 
 
NICO retention for losses and loss expenses incurred on or before 12/31/92
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
755,000,000 
 
NICO remaining unused limit under the 1998 agreement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
504,000,000 
 
Statutory surplus required by Century under the 1996 Pennsylvania insurance department restructuring order
 
 
 
 
 
25,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividend retention fund established by INA Financial Corporation
50,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The minimum required balance of the Dividend Retention Fund
50,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contributions to the dividend retention fund
35,000,000 
15,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Minimum capital contributions from the dividend retention fund to century not be required for xol agreement
200,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase in Century's assets as a result of a transfer in CIRC stock
169,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase in Century's surplus as a result of a transfer in CIRC stock
 
 
 
26,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Statutory surplus of century
25,000,000 
 
 
51,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate reinsurance balances ceded by active ACE entities to Century
877,000,000 
881,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross reserves carried by Century
2,400,000,000 
2,700,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Minimum number of years for which liabilities relating to intercompany recoverables are payable
25 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Remaining cover on a paid loss basis after being ceded from Century to NICO
624,000,000 
928,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Losses ceded by Century to the active ACE Companies and other amounts owed to Century
526,000,000 
453,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INA Holdings contribution to Century in exchange for a surplus note
 
 
 
 
100,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Statutory-basis losses ceded to the XOL agreement on an inception to date basis
146,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount of undiscounted losses ceded under the XOL agreement
440,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Remaining limit of coverage under the XOL agreement
360,000,000 
 
410,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount of excess of loss (XOL) reinsurance coverage provided to Century
800,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Minimum capital and surplus for the XOL not to be triggered
$ 25,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unpaid Losses And Loss Expenses (Unpaid Losses And Loss Expenses Roll-Forward) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Unpaid Losses And Loss Expenses [Abstract]
 
 
 
Gross unpaid losses and loss expenses, beginning of the year
$ 37,391 
$ 37,783 
$ 37,176 
Reinsurance recoverable on unpaid losses, beginning of the year
(12,149)1
(12,745)1
(12,935)1
Net unpaid losses and loss expenses, beginning of year
25,242 
25,038 
24,241 
Acquisition of subsidiaries
92 
145 
 
Net unpaid losses and loss expenses, Adjusted
25,334 
25,183 
24,241 
Net losses and loss expenses incurred, Current year
10,076 
8,082 
7,998 
Net losses and loss expenses incurred, Prior years
(556)
(503)
(576)
Net losses and loss expenses incurred, Total
9,520 
7,579 
7,422 
Net losses and loss expenses paid, Current year
4,209 
2,689 
2,493 
Net losses and loss expenses paid, Prior years
4,657 
4,724 
4,455 
Net losses and loss expenses paid, Total
8,866 
7,413 
6,948 
Foreign currency revaluation and other
(113)
(107)
323 
Net unpaid losses and loss expenses, end of year
25,875 
25,242 
25,038 
Reinsurance recoverable on unpaid losses, end of the year
11,602 
12,149 1
12,745 1
Gross unpaid losses and loss expenses, end of the year
$ 37,477 
$ 37,391 
$ 37,783 
Unpaid Losses And Loss Expenses (A&E Loss Roll-Forward) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Unpaid Losses And Loss Expenses [Line Items]
 
A&E loss reserves, gross - opening
$ 2,446 
A&E gross - incurred activity
214 
A&E gross - Payment activity
(410)
A&E loss reserves, gross - closing
2,250 
A&E loss reserves, net - opening
1,335 
A&E net - incurred activity
104 
A&E net - Payment activity
(243)
A&E loss reserves, net - closing
1,196 
Asbestos Issue [Member]
 
Unpaid Losses And Loss Expenses [Line Items]
 
A&E loss reserves, gross - opening
2,130 
A&E gross - incurred activity
148 
A&E gross - Payment activity
(311)
A&E loss reserves, gross - closing
1,967 
A&E loss reserves, net - opening
1,120 
A&E net - incurred activity
67 
A&E net - Payment activity
(168)
A&E loss reserves, net - closing
1,019 
Environmental Issue [Member]
 
Unpaid Losses And Loss Expenses [Line Items]
 
A&E loss reserves, gross - opening
316 
A&E gross - incurred activity
66 
A&E gross - Payment activity
(99)
A&E loss reserves, gross - closing
283 
A&E loss reserves, net - opening
215 
A&E net - incurred activity
37 
A&E net - Payment activity
(75)
A&E loss reserves, net - closing
$ 177 
Unpaid Losses And Loss Expenses (Brandywine Incurred Loss Activity) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Unpaid Losses And Loss Expenses [Line Items]
 
 
 
Net unpaid losses and loss expenses, beginning of year
$ 25,242 
$ 25,038 
$ 24,241 
Incurred activity
9,520 
7,579 
7,422 
Paid activity
8,866 
7,413 
6,948 
Net unpaid losses and loss expenses, end of year
25,875 
25,242 
25,038 
Brandywine [Member] |
Asbestos And Environmental Total [Member]
 
 
 
Unpaid Losses And Loss Expenses [Line Items]
 
 
 
Net unpaid losses and loss expenses, beginning of year
1,044 
 
 
Incurred activity
59 
 
 
Paid activity
(194)
 
 
Net unpaid losses and loss expenses, end of year
909 
 
 
Brandywine [Member] |
Other Lines Of Business [Member]
 
 
 
Unpaid Losses And Loss Expenses [Line Items]
 
 
 
Net unpaid losses and loss expenses, beginning of year
881 1
 
 
Incurred activity
1
 
 
Paid activity
(98)1
 
 
Net unpaid losses and loss expenses, end of year
792 1
 
 
Brandywine [Member] |
Total Loss And Loss Expenses Before NICO Coverage [Member]
 
 
 
Unpaid Losses And Loss Expenses [Line Items]
 
 
 
Net unpaid losses and loss expenses, beginning of year
1,925 
 
 
Incurred activity
68 
 
 
Paid activity
(292)
 
 
Net unpaid losses and loss expenses, end of year
1,701 
 
 
Brandywine [Member] |
NICO Coverage [Member]
 
 
 
Unpaid Losses And Loss Expenses [Line Items]
 
 
 
Net unpaid losses and loss expenses, beginning of year
928 
 
 
Paid activity
(304)
 
 
Net unpaid losses and loss expenses, end of year
624 
 
 
Brandywine [Member] |
Total Loss And Loss Expense Net NICO Coverage [Member]
 
 
 
Unpaid Losses And Loss Expenses [Line Items]
 
 
 
Net unpaid losses and loss expenses, beginning of year
997 
 
 
Incurred activity
68 
 
 
Paid activity
12 
 
 
Net unpaid losses and loss expenses, end of year
$ 1,077 
 
 
Unpaid Losses And Loss Expenses (Westchester Incurred Loss Activity) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Unpaid Losses And Loss Expenses [Line Items]
 
 
 
Net unpaid losses and loss expenses, beginning of year
$ 25,242 
$ 25,038 
$ 24,241 
Incurred activity
9,520 
7,579 
7,422 
Paid activity
8,866 
7,413 
6,948 
Net unpaid losses and loss expenses, end of year
25,875 
25,242 
25,038 
Westchester Specialty [Member] |
Asbestos And Environmental Total [Member]
 
 
 
Unpaid Losses And Loss Expenses [Line Items]
 
 
 
Net unpaid losses and loss expenses, beginning of year
122 
 
 
Incurred activity
48 
 
 
Paid activity
(27)
 
 
Net unpaid losses and loss expenses, end of year
143 
 
 
Westchester Specialty [Member] |
Other Lines Of Business [Member]
 
 
 
Unpaid Losses And Loss Expenses [Line Items]
 
 
 
Net unpaid losses and loss expenses, beginning of year
87 
 
 
Incurred activity
(29)
 
 
Paid activity
(4)
 
 
Net unpaid losses and loss expenses, end of year
54 
 
 
Westchester Specialty [Member] |
Total Loss And Loss Expenses Before NICO Coverage [Member]
 
 
 
Unpaid Losses And Loss Expenses [Line Items]
 
 
 
Net unpaid losses and loss expenses, beginning of year
209 
 
 
Incurred activity
19 
 
 
Paid activity
(31)
 
 
Net unpaid losses and loss expenses, end of year
197 
 
 
Westchester Specialty [Member] |
NICO Coverage [Member]
 
 
 
Unpaid Losses And Loss Expenses [Line Items]
 
 
 
Net unpaid losses and loss expenses, beginning of year
186 
 
 
Incurred activity
14 
 
 
Paid activity
(35)
 
 
Net unpaid losses and loss expenses, end of year
165 
 
 
Westchester Specialty [Member] |
Total Loss And Loss Expense Net NICO Coverage [Member]
 
 
 
Unpaid Losses And Loss Expenses [Line Items]
 
 
 
Net unpaid losses and loss expenses, beginning of year
23 
 
 
Incurred activity
 
 
Paid activity
 
 
Net unpaid losses and loss expenses, end of year
$ 32 
 
 
Taxation (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Income Taxes [Line Items]
 
 
 
Valuation allowance
$ 57 
$ 31 
 
Net operating loss carry-forward
172 
 
 
Foreign tax credit carry-forward
42 
 
 
Operating loss carry-forward, expiration dates
2012-2031 
 
 
Unrecognized tax benefits for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility
 
Unrecognized tax benefits that would impact effective tax rate
133 
 
 
Tax-related interest and penalties reported
(1)
Value of liabilities reflected in the balance sheet for tax-related interest
22 
19 
 
Impact of IRS settlement on unrecognized tax benefits, reduction
 
$ 21 
 
Period in months under which it is reasonably possible that there could be significant change in unrecognized tax benefit
12 
 
 
Switzerland [Member]
 
 
 
Income Taxes [Line Items]
 
 
 
Taxation rates
7.83% 
 
 
Bermuda [Member]
 
 
 
Income Taxes [Line Items]
 
 
 
Taxation rates
0.00% 
 
 
United States [Member]
 
 
 
Income Taxes [Line Items]
 
 
 
Taxation rates
35.00% 
 
 
U.K. [Member]
 
 
 
Income Taxes [Line Items]
 
 
 
Taxation rates
26.00% 
 
 
Foreign [Member]
 
 
 
Income Taxes [Line Items]
 
 
 
Foreign tax credit carry-forward, expiration dates
2015-2019 
 
 
Taxation (Provision For Income Taxes) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Taxation [Abstract]
 
 
 
Current tax expense
$ 485 
$ 443 
$ 547 
Deferred tax expense (benefit)
21 
116 
(19)
Provision for income taxes
$ 506 
$ 559 
$ 528 
Taxation (Reconciliation Of The Difference Between The Provision For Income Taxes And The Tax Provision at Statutory Income Tax Rate) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Taxation [Abstract]
 
 
 
Expected tax provision at Swiss statutory tax rate
$ 164 
$ 287 
$ 241 
Taxes on earnings subject to rate other than Swiss statutory tax rate
323 
327 
319 
Tax-exempt interest and dividends received deduction, net of proration
(21)
(20)
(25)
Net withholding taxes
19 
15 
14 
Change in valuation allowance
(2)
(3)
(48)
Non-taxable acquisition gain
 
(61)
 
Other
23 
14 
27 
Provision for income taxes
$ 506 
$ 559 
$ 528 
Taxation (Components Of Net Deferred Tax Assets) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Taxation [Abstract]
 
 
Loss reserve discount
$ 933 
$ 852 
Unearned premiums reserve
85 
87 
Foreign tax credits
1,074 
952 
Investments
67 
51 
Provision for uncollectible balances
113 
132 
Loss carry-forwards
43 
57 
Other, net
31 
114 
Cumulative translation adjustment
Total deferred tax assets
2,351 
2,247 
Deferred policy acquisition costs
107 
100 
VOBA and other intangible assets
373 
367 
Un-remitted foreign earnings
810 
718 
Unrealized appreciation on investments
392 
262 
Total deferred tax liabilities
1,682 
1,447 
Valuation allowance
57 
31 
Net deferred tax assets
$ 612 
$ 769 
Taxation (Reconciliation Of Unrecognized Tax Benefits) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Taxation [Abstract]
 
 
Unrecognized tax benefit, beginning of year
$ 139 
$ 155 
Additions based on tax positions related to the current year
Reductions for tax positions of prior years
(6)
(17)
Unrecognized tax benefit, end of year
$ 134 
$ 139 
Debt (Narrative) (Details) (USD $)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Debt Instrument [Line Items]
 
 
Short-term debt
$ 1,251,000,000 
$ 1,300,000,000 
Long-term debt
3,360,000,000 
3,358,000,000 
Percent of principal amount of Subordinated Debentures
100.00% 
 
Reverse Repurchase Agreement [Member]
 
 
Debt Instrument [Line Items]
 
 
Short-term debt
1,251,000,000 
1,000,000,000 
Weighted average interest rate
0.32% 
 
Capital Securities [Member] |
ACE Capital Trust II [Member]
 
 
Debt Instrument [Line Items]
 
 
Stated amount of the debt at date of issuance
300,000,000 
 
Interest rate on debt (stated)
9.70% 
 
Common trust securities purchased
9,200,000 
 
Debt Due Date 2014 [Member] |
Senior Notes [Member] |
Debt Issuer ACE INA [Member]
 
 
Debt Instrument [Line Items]
 
 
Stated amount of the debt at date of issuance
500,000,000 
 
Interest rate on debt (stated)
5.875% 
 
Make Whole Premium Additional Percent
0.20% 
 
Long-term debt
500,000,000 
500,000,000 
Debt Due Date 2015 [Member] |
Senior Notes [Member] |
Debt Issuer ACE INA [Member]
 
 
Debt Instrument [Line Items]
 
 
Stated amount of the debt at date of issuance
450,000,000 
 
Interest rate on debt (stated)
5.60% 
 
Make Whole Premium Additional Percent
0.35% 
 
Long-term debt
449,000,000 
447,000,000 
Debt Due Date 2015 [Member] |
Senior Notes [Member] |
Debt Issuer ACE INA [Member]
 
 
Debt Instrument [Line Items]
 
 
Stated amount of the debt at date of issuance
700,000,000 
 
Interest rate on debt (stated)
2.60% 
 
Make Whole Premium Additional Percent
0.20% 
 
Long-term debt
699,000,000 
699,000,000 
Debt Due Date 2017 [Member] |
Senior Notes [Member] |
Debt Issuer ACE INA [Member]
 
 
Debt Instrument [Line Items]
 
 
Stated amount of the debt at date of issuance
500,000,000 
 
Interest rate on debt (stated)
5.70% 
 
Make Whole Premium Additional Percent
0.20% 
 
Long-term debt
500,000,000 
500,000,000 
Debt Due Date 2018 [Member] |
Senior Notes [Member] |
Debt Issuer ACE INA [Member]
 
 
Debt Instrument [Line Items]
 
 
Stated amount of the debt at date of issuance
300,000,000 
 
Interest rate on debt (stated)
5.80% 
 
Make Whole Premium Additional Percent
0.35% 
 
Long-term debt
300,000,000 
300,000,000 
Debt Due Date 2019 [Member] |
Senior Notes [Member] |
Debt Issuer ACE INA [Member]
 
 
Debt Instrument [Line Items]
 
 
Stated amount of the debt at date of issuance
500,000,000 
 
Interest rate on debt (stated)
5.90% 
 
Make Whole Premium Additional Percent
0.40% 
 
Long-term debt
500,000,000 
500,000,000 
Debt Due Date December 2019 [Member] |
City Of Philadelphia [Member] |
ACE American [Member]
 
 
Debt Instrument [Line Items]
 
 
Stated amount of the debt at date of issuance
8,000,000 
 
Interest rate on debt (stated)
7.10% 
 
Long-term debt
7,000,000 
 
Debt Due Date 2029 [Member] |
Debentures [Member] |
Debt Issuer ACE INA [Member]
 
 
Debt Instrument [Line Items]
 
 
Stated amount of the debt at date of issuance
100,000,000 
 
Interest rate on debt (stated)
8.875% 
 
Long-term debt
100,000,000 
100,000,000 
Debt Due Date 2036 [Member] |
Senior Notes [Member] |
Debt Issuer ACE INA [Member]
 
 
Debt Instrument [Line Items]
 
 
Stated amount of the debt at date of issuance
300,000,000 
 
Interest rate on debt (stated)
6.70% 
 
Make Whole Premium Additional Percent
0.20% 
 
Long-term debt
299,000,000 
299,000,000 
Debt Due Date 2020 [Member] |
PIDA [Member] |
ACE American [Member]
 
 
Debt Instrument [Line Items]
 
 
Stated amount of the debt at date of issuance
10,000,000 
 
Interest rate on debt (stated)
2.75% 
 
Long-term debt
6,000,000 
 
Debt Due Date 2020 [Member] |
Other Long Term Debt [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
13,000,000 
13,000,000 
Debt Due Date 2030 [Member] |
Trust Preferred Securities [Member] |
Debt Issuer ACE INA [Member]
 
 
Debt Instrument [Line Items]
 
 
Stated amount of the debt at date of issuance
$ 309,000,000 
 
Interest rate on debt (stated)
9.70% 
 
Debt (Schedule Of Debt Outstanding) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Debt Instrument [Line Items]
 
 
Short-term debt
$ 1,251 
$ 1,300 
Long-term debt
3,360 
3,358 
Trust preferred securities
309 
309 
Revolving Credit Facility [Member] |
Debt Issuer ACE INA [Member]
 
 
Debt Instrument [Line Items]
 
 
Short-term debt
 
300 
Reverse Repurchase Agreement [Member]
 
 
Debt Instrument [Line Items]
 
 
Short-term debt
1,251 
1,000 
Debt Due Date 2014 [Member] |
Senior Notes [Member] |
Debt Issuer ACE INA [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
500 
500 
Debt Due Date 2015 [Member] |
Senior Notes [Member] |
Debt Issuer ACE INA [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
449 
447 
Debt Due Date 2015 [Member] |
Senior Notes [Member] |
Debt Issuer ACE INA [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
699 
699 
Debt Due Date 2017 [Member] |
Senior Notes [Member] |
Debt Issuer ACE INA [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
500 
500 
Debt Due Date 2018 [Member] |
Senior Notes [Member] |
Debt Issuer ACE INA [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
300 
300 
Debt Due Date 2019 [Member] |
Senior Notes [Member] |
Debt Issuer ACE INA [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
500 
500 
Debt Due Date 2029 [Member] |
Debentures [Member] |
Debt Issuer ACE INA [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
100 
100 
Debt Due Date 2036 [Member] |
Senior Notes [Member] |
Debt Issuer ACE INA [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
299 
299 
Debt Due Date 2020 [Member] |
Other Long Term Debt [Member]
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
13 
13 
Debt Due Date 2030 [Member] |
Capital Securities [Member] |
Debt Issuer ACE INA [Member]
 
 
Debt Instrument [Line Items]
 
 
Trust preferred securities
$ 309 
$ 309 
Commitments, Contingencies, And Guarantees (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Commitments Contingencies And Guarantees [Line Items]
 
 
 
Interest rate swaps in force
 
 
Concentration risk - Marsh Inc
12.00% 
 
 
Concentration risk - AON Corporation
10.00% 
 
 
Carrying value of limited partnerships and partially-owned investment companies included in other investments
$ 1,435 
 
 
Funding commitments relating to limited partnerships and partially-owned investment companies
777 
 
 
Revolving credit facilities, maximum
500 
 
 
Revolving credit facility - LOC
55 
 
 
Operating leases, rent expense
114 
83 
84 
Case settlement
1.97 
 
 
Letter Of Credit Unsecured Expiring November 2012 [Member]
 
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
 
Letter of credit - maximum
1,000 
 
 
Letter of credit - utilized
948 
 
 
Letter Of Credit Unsecured Expiring September 2014 [Member]
 
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
 
Letter of credit - maximum
500 
 
 
Letter Of Credit Bilateral Uncollateralized Expiring December 2015 [Member]
 
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
 
Letter of credit - maximum
400 
 
 
Letter of credit - utilized
$ 392 
 
 
Commitments, Contingencies, And Guarantees (Balance Sheet Locations, Fair Values In An Asset Or (Liability) Position, And Notional Values/Payment Provisions Of Derivative Instruments) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Investment And Embedded Derivative Instruments [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
$ 427 
$ 528 
Notional Value/Payment Provision
12,906 
6,183 
Other Derivatives Instruments [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
41 
25 
Notional Value/Payment Provision
1,973 
1,686 
Accounts Payable, Accrued Expenses, And Other Liabilities [Member] |
Foreign Currency Forward Contracts [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
Notional Value/Payment Provision
674 
729 
Accounts Payable, Accrued Expenses, And Other Liabilities [Member] |
Futures Contracts On Money Market Instruments [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
Notional Value/Payment Provision
10,476 
4,297 
Accounts Payable, Accrued Expenses, And Other Liabilities [Member] |
Futures Contracts On Notes And Bonds [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
(4)
Notional Value/Payment Provision
1,055 
676 
Accounts Payable, Accrued Expenses, And Other Liabilities [Member] |
Options On Money Market Instruments [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Notional Value/Payment Provision
292 
Accounts Payable, Accrued Expenses, And Other Liabilities [Member] |
Future Contracts On Equities [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
(16)1
(25)1
Notional Value/Payment Provision
1,367 1
1,069 1
Accounts Payable, Accrued Expenses, And Other Liabilities [Member] |
Options On Equity Market Indices [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
54 1
46 1
Notional Value/Payment Provision
250 1
250 1
Accounts Payable, Accrued Expenses, And Other Liabilities [Member] |
Credit Default Swaps [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
Notional Value/Payment Provision
350 
350 
Accounts Payable, Accrued Expenses, And Other Liabilities [Member] |
Other [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Notional Value/Payment Provision
17 
Fixed Maturities Available For Sale [Member] |
Convertible Bonds [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
357 
416 
Notional Value/Payment Provision
353 
382 
Fixed Maturities Available For Sale [Member] |
To Be Announced Mortgage-Backed Securities [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
60 
101 
Notional Value/Payment Provision
56 
98 
Accounts Payable Future Policy Benefits [Member] |
Guaranteed Living Benefits [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value
(1,505)2
(648)2
Notional Value/Payment Provision
$ 1,378 2
$ 649 2
Commitments, Contingencies, And Guarantees (Net Realized Gains (Losses) Of Derivative Instrument Activity In Consolidated Statement Of Operations) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Commitments Contingencies And Guarantees [Line Items]
 
 
Net realized gains (losses)
$ (930)
$ (139)
Foreign Currency Forward Contracts [Member]
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
Net realized gains (losses)
21 
All Other Futures Contracts And Options [Member]
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
Net realized gains (losses)
(98)
29 
Convertible Bonds [Member]
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
Net realized gains (losses)
(50)
To Be Announced Mortgage-Backed Securities [Member]
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
Net realized gains (losses)
(1)
Investment And Embedded Derivative Instruments [Member]
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
Net realized gains (losses)
(143)
58 
Guaranteed Living Benefits [Member]
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
Net realized gains (losses)
(779)1
(28)1
Future Contracts On Equities [Member]
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
Net realized gains (losses)
(12)2
(140)2
Options On Equity Market Indices [Member]
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
Net realized gains (losses)
2
(10)2
Interest Rate Swaps [Member]
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
Net realized gains (losses)
 
(21)
Credit Default Swaps [Member]
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
Net realized gains (losses)
(4)
Other [Member]
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
Net realized gains (losses)
 
Guaranteed Living Benefit And Other Derivative Instruments [Member]
 
 
Commitments Contingencies And Guarantees [Line Items]
 
 
Net realized gains (losses)
$ (787)
$ (197)
Commitments, Contingencies, And Guarantees (Future Minimum Lease Payments) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Commitments, Contingencies, And Guarantees [Abstract]
 
2012
$ 93 
2013
72 
2014
60 
2015
54 
2016
52 
Thereafter
166 
Total minimum future lease commitments
$ 497 
Shareholders' Equity (Narrative) (Details)
In Millions, except Share data, unless otherwise specified
1 Months Ended 12 Months Ended 12 Months Ended
Aug. 31, 2011
USD ($)
Nov. 30, 2010
USD ($)
Dec. 31, 2011
USD ($)
Dec. 31, 2010
USD ($)
Dec. 31, 2010
CHF
Dec. 31, 2009
CHF
Dec. 31, 2011
CHF
Dec. 31, 2009
USD ($)
Dec. 31, 2011
Common Stock Par Value [Member]
CHF
Stockholders' Equity [Line Items]
 
 
 
 
 
 
 
 
 
Common shares - par value
 
 
 
 
 30.57 
 
 30.27 
 
 
Dividends declared per common share
 
 
$ 1.38 
$ 1.30 
 1.31 
 1.26 
 
 
 1.22 
Par value distribution per share
 
 
 
 
 
 
 0.30 
$ 1.19 
 
Dividend installments
 
 
$ 0.35 
 
 
 
 
 
 
The number of votes associated with one Common Share
 
 
 
 
 
 
 
 
The maximum ownership percentage for voting allowed for any one shareholder
 
 
10.00% 
 
 
 
 
 
 
Revised dividend installments
 
 
$ 0.47 
 
 
 
 
 
 
Common shares in treasury, shares
 
 
5,905,136 
6,151,707 
6,151,707 
 
 
1,316,959 
 
Stock repurchase program, authorized amount
$ 303 
$ 600 
 
 
 
 
 
 
 
Repurchase of outstanding common shares
 
 
2,058,860 
4,926,082 
4,926,082 
 
 
 
 
Cost of shares acquired
 
 
132 
303 
 
 
 
 
 
Share repurchase authorization remains
$ 197 
 
$ 468 
 
 
 
 
 
 
Authorized share capital for general purposes
 
 
140,000,000 
 
 
 
 
 
 
Conditional share capital for bonds and similar debt issuances
 
 
33,000,000 
 
 
 
 
 
 
Par value per share of conditional share capital for bonds and similar debt instruments
 
 
 
 
 
 
 
 
 30.27 
Par value per share of conditional share capital for employee benefit plans
 
 
 
 
 
 
 
 
 30.27 
Conditional share capital for employee benefit plans
 
 
25,410,929 
 
 
 
 
 
 
Shareholders Equity (Rollforward Of Changes In Common Shares Issued And Outstanding) (Details)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Shareholders' Equity [Abstract]
 
 
 
Shares issued, beginning of year
341,094,559 
337,841,616 
335,413,501 
Shares issued, net
 
2,268,000 
2,000,000 
Exercise of stock options
1,737,853 
984,943 
168,720 
Shares issued under ESPP
 
 
259,395 
Shares issued, end of year
342,832,412 
341,094,559 
337,841,616 
Common Shares in treasury, end of year
(5,905,136)
(6,151,707)
(1,316,959)
Shares issued and outstanding, end of year
336,927,276 
334,942,852 
336,524,657 
Balance, beginning of year
(101,481)
(101,481)
(108,981)
Shares redeemed
92,014 
 
7,500 
Balance, end of year
(9,467)
(101,481)
(101,481)
Share-Based Compensation (Narrative) (Details) (USD $)
12 Months Ended
Dec. 31, 2011
years
Dec. 31, 2010
Dec. 31, 2009
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Shares authorized to issued under ESPP
3,000,000 
 
 
Shares authorized but not issued under the ESPP
189,297 
 
 
Share-based compensation expense for stock options and shares issued under ESPP
$ 27,000,000 
$ 28,000,000 
$ 27,000,000 
Share-based compensation expense for stock options and shares issued under the ESPP, net of tax
15,000,000 
21,000,000 
11,000,000 
Restricted stock expense
112,000,000 
111,000,000 
94,000,000 
Restricted stock expense net of tax
73,000,000 
79,000,000 
75,000,000 
Unrecognized compensation expense related to the unvested portion of the employee share-based awards
120,000,000 
 
 
Weighted-average period in years over which the unrecognized compensation expense related to the unvested portion of the Company's employee share-based award will be recognized
 
 
Non-qualified stock options price per share percent of the fair value
100.00% 
 
 
Weighted-average remaining contractual term in years for stock options outstanding
6.1 
 
 
Weighted-average remaining contractual term in years for stock options exercisable
4.7 
 
 
Share-based compensation arrangement by share-based payment award, award vesting period, years
 
 
Stock option term in years
10 
 
 
Intrinsic value for stock options outstanding
215,000,000 
 
 
Intrinsic value for stock options exercisable
157,000,000 
 
 
Weighted-average fair value for stock options granted
$ 14.67 
$ 12.09 
$ 12.95 
Total intrinsic value for stock options exercised
63,000,000 
22,000,000 
12,000,000 
Cash received from the exercise of stock options
121,000,000 
 
 
Restricted stock award and units vesting period in years
 
 
Weighted average grant date fair value of awards except for options granted to employees and officers of the company
$ 62.85 
$ 50.36 
$ 38.75 
Amount of common shares delivered for each restricted stock unit
 
 
Restricted stock units awarded to employees, and officers of the company
261,214 
326,091 
333,104 
Restricted stock units awarded to non-management directors
32,660 
36,248 
 
ESPP - Percentage of purchase price fair value paid by employees
85.00% 
 
 
ESPP - Contribution limitation
25,000 
 
 
ESPP - Salary percentage limitation
10.00% 
 
 
ESPP - Employee contributions
$ 11,800,000 
 
 
ESPP - Shares purchased
205,812 
 
 
ESPP - Number of subscription periods per year
 
 
Unvested restricted stock units
656,837 
 
 
Deferred restricted stock units
226,503 
 
 
2004 LTIP [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Number of common shares authorized to issued
 
30,600,000 
 
Shares remain available for future issuance
9,411,758 
 
 
Restricted stock award and units vesting period in years
 
 
Share-Based Compensation (Weighted-Average Assumptions For Grants) (Details)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Share-Based Compensation [Abstract]
 
 
 
Dividend yield
2.20% 
2.50% 
2.80% 
Expected volatility
28.80% 
30.30% 
45.40% 
Risk-free interest rate
2.30% 
2.50% 
2.20% 
Forfeiture rate
6.50% 
7.50% 
7.50% 
Expected life, years
5.4 
5.4 
5.4 
Share-Based Compensation (Rollforward Of Company's Stock Options) (Details) (USD $)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Share-Based Compensation [Abstract]
 
 
 
Options outstanding
11,942,893 
11,483,104 
9,923,563 
Options Granted
1,649,824 
2,094,227 
2,339,036 
Options Exercised
(2,741,238)
(1,328,715)
(537,556)
Options Forfeited
(271,972)
(305,723)
(241,939)
Options outstanding
10,579,507 
11,942,893 
11,483,104 
Options exercisable
7,044,330 
 
 
Options Outstanding Weighted-Average Exercise Price
$ 46.80 
$ 45.46 
$ 46.24 
Options Granted Weighted-Average Exercise Price
$ 62.68 
$ 50.38 
$ 38.60 
Options Exercised Weighted-Average Exercise Price
$ 44.45 
$ 40.11 
$ 27.71 
Options Forfeited Weighted-Average Exercise Price
$ 51.33 
$ 49.77 
$ 50.48 
Options Outstanding Weighted-Average Exercise Price
$ 49.78 
$ 46.80 
$ 45.46 
Options exercisable Weighted-Average Exercise Price
$ 47.80 
 
 
Share-Based Compensation (Rollforward Of Company's Restricted Stock) (Details) (USD $)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Share-Based Compensation [Abstract]
 
 
 
Unvested restricted stock
5,305,732 
4,873,429 
3,883,230 
Number of Restricted Stock Granted
1,808,745 
2,461,076 
2,603,344 
Number of Restricted Stock Vested and issued
(1,929,189)
(1,771,423)
(1,447,676)
Number of Restricted Stock Forfeited
(333,798)
(257,350)
(165,469)
Unvested restricted stock
4,851,490 
5,305,732 
4,873,429 
Unvested restricted stock Weighted-Average Grant-Date Fair Value
$ 48.74 
$ 48.25 
$ 57.01 
Unvested restricted stock Granted Weighted-Average Grant-Date Fair Value
$ 60.01 
$ 51.09 
$ 39.05 
Unvested restricted stock Vested and issued Weighted-Average Grant-Date Fair Value
$ 50.82 
$ 50.79 
$ 54.85 
Unvested restricted stock Forfeited Weighted-Average Grant-Date Fair Value
$ 47.46 
$ 47.93 
$ 51.45 
Unvested restricted stock Weighted-Average Grant-Date Fair Value
$ 52.20 
$ 48.74 
$ 48.25 
Pension Plans (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Pension Plans [Abstract]
 
 
 
Defined contribution plans, expenses
$ 96 
$ 87 
$ 84 
Defined benefit plans, fair value plan assets
434 
394 
 
Defined benefit plan, projected benefit obligation
508 
487 
 
Defined benefit plans, accrued pension liability
74 
93 
 
Defined benefit plans expected contribution on plan assets
17 
 
 
DBP Estimated net actuarial loss amortized in 2012
 
 
Defined benefit plan, benefits payment
$ 16 
$ 15 
 
Pension Plans (Schedule Of Expected Future Payments) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Pension Plans [Abstract]
 
2012
$ 22 
2013
23 
2014
22 
2015
24 
2016
25 
2017-2021
$ 131 
Other (Income) Expense (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Other (Income) Expense [Abstract]
 
 
 
Losses from separate account assets
$ 36 
 
 
Equity in net (income) loss of partially-owned entities
(40)
(81)
39 
Federal excise and capital taxes
20 
19 
16 
Amortization of intangible assets
29 
11 
Noncontrolling interest expense
14 
Other
26 1
23 1
16 1
Other (income) expense
73 
(16)
85 
Acquisition-related costs
$ 5 
$ 14 
 
Segment Information (Operations By Segment) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Sep. 30, 2010
Jun. 30, 2010
Mar. 31, 2010
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Segment Reporting [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
$ 15,372 
$ 13,708 
$ 13,299 
Net premiums earned
3,831 
4,490 
3,757 
3,309 
3,572 
3,422 
3,233 
3,277 
15,387 
13,504 
13,240 
Losses and loss expenses
2,286 
2,745 
2,226 
2,263 
1,971 
1,887 
1,800 
1,921 
9,520 
7,579 
7,422 
Policy benefits
119 
83 
108 
91 
90 
93 
87 
87 
401 
357 
325 
Policy acquisition costs
 
 
 
 
 
 
 
 
2,447 
2,337 
2,130 
Administrative expenses
 
 
 
 
 
 
 
 
2,052 
1,858 
1,811 
Underwriting income (loss)
 
 
 
 
 
 
 
 
967 
1,373 
1,552 
Net investment income
565 
564 
569 
544 
532 
516 
518 
504 
2,242 
2,070 
2,031 
Net realized gains (losses) including OTTI
83 
(760)
(73)
(45)
305 
(50)
168 
(795)
432 
(196)
Interest expense
 
 
 
 
 
 
 
 
250 
224 
225 
Losses from separate account assets
 
 
 
 
 
 
 
 
36 
 
 
Other (income) expense
 
 
 
 
 
 
 
 
73 
(16)
85 
Other
 
 
 
 
 
 
 
 
37 
 
 
Income tax expense (benefit)
 
 
 
 
 
 
 
 
506 
559 
528 
Net income
750 
(31)
607 
259 
1,001 
675 
677 
755 
1,585 
3,108 
2,549 
Insurance - North American [Member]
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
6,851 
5,797 
5,641 
Net premiums earned
 
 
 
 
 
 
 
 
6,911 
5,651 
5,684 
Losses and loss expenses
 
 
 
 
 
 
 
 
5,276 
3,918 
4,013 
Policy acquisition costs
 
 
 
 
 
 
 
 
613 
625 
517 
Administrative expenses
 
 
 
 
 
 
 
 
592 
561 
572 
Underwriting income (loss)
 
 
 
 
 
 
 
 
430 
547 
582 
Net investment income
 
 
 
 
 
 
 
 
1,170 
1,138 
1,094 
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
34 
417 
10 
Interest expense
 
 
 
 
 
 
 
 
15 
Other (income) expense
 
 
 
 
 
 
 
 
 
(22)
36 
Other
 
 
 
 
 
 
 
 
 
 
Income tax expense (benefit)
 
 
 
 
 
 
 
 
394 
436 
384 
Net income
 
 
 
 
 
 
 
 
1,220 
1,679 
1,265 
Insurance - Overseas General [Member]
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
5,756 
5,280 
5,145 
Net premiums earned
 
 
 
 
 
 
 
 
5,737 
5,240 
5,147 
Losses and loss expenses
 
 
 
 
 
 
 
 
3,073 
2,647 
2,597 
Policy benefits
 
 
 
 
 
 
 
 
 
Policy acquisition costs
 
 
 
 
 
 
 
 
1,393 
1,251 
1,202 
Administrative expenses
 
 
 
 
 
 
 
 
945 
840 
783 
Underwriting income (loss)
 
 
 
 
 
 
 
 
326 
498 
561 
Net investment income
 
 
 
 
 
 
 
 
548 
475 
479 
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
33 
123 
(20)
Interest expense
 
 
 
 
 
 
 
 
 
Other (income) expense
 
 
 
 
 
 
 
 
 
(13)
20 
Income tax expense (benefit)
 
 
 
 
 
 
 
 
169 
173 
186 
Net income
 
 
 
 
 
 
 
 
733 
935 
814 
Global Reinsurance [Member]
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
979 
1,075 
1,038 
Net premiums earned
 
 
 
 
 
 
 
 
1,003 
1,071 
979 
Losses and loss expenses
 
 
 
 
 
 
 
 
621 
518 
330 
Policy acquisition costs
 
 
 
 
 
 
 
 
185 
204 
195 
Administrative expenses
 
 
 
 
 
 
 
 
52 
55 
55 
Underwriting income (loss)
 
 
 
 
 
 
 
 
145 
294 
399 
Net investment income
 
 
 
 
 
 
 
 
287 
288 
278 
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
(50)
93 
(17)
Interest expense
 
 
 
 
 
 
 
 
 
 
Other (income) expense
 
 
 
 
 
 
 
 
 
(23)
Other
 
 
 
 
 
 
 
 
(1)
 
 
Income tax expense (benefit)
 
 
 
 
 
 
 
 
30 
42 
46 
Net income
 
 
 
 
 
 
 
 
351 
656 
612 
Life [Member]
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
1,786 
1,556 
1,475 
Net premiums earned
 
 
 
 
 
 
 
 
1,736 
1,542 
1,430 
Losses and loss expenses
 
 
 
 
 
 
 
 
549 
496 
482 
Policy benefits
 
 
 
 
 
 
 
 
401 
353 
321 
Policy acquisition costs
 
 
 
 
 
 
 
 
255 
257 
216 
Administrative expenses
 
 
 
 
 
 
 
 
295 
228 
243 
Underwriting income (loss)
 
 
 
 
 
 
 
 
236 
208 
168 
Management underwriting income (loss) insurance
 
 
 
 
 
 
 
 
424 
 
 
Net investment income
 
 
 
 
 
 
 
 
224 
172 
176 
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
(806)
(192)
(15)
Interest expense
 
 
 
 
 
 
 
 
11 
 
Losses from separate account assets
 
 
 
 
 
 
 
 
36 
 
 
Other (income) expense
 
 
 
 
 
 
 
 
 
20 
Other
 
 
 
 
 
 
 
 
18 
 
 
Income tax expense (benefit)
 
 
 
 
 
 
 
 
50 
62 
48 
Net income
 
 
 
 
 
 
 
 
(461)
103 
279 
Corporate And Other [Member]
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Losses and loss expenses
 
 
 
 
 
 
 
 
 
 
Policy acquisition costs
 
 
 
 
 
 
 
 
 
 
Administrative expenses
 
 
 
 
 
 
 
 
168 
174 
158 
Underwriting income (loss)
 
 
 
 
 
 
 
 
(170)
(174)
(158)
Net investment income
 
 
 
 
 
 
 
 
13 
(3)
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
(6)
(9)
(154)
Interest expense
 
 
 
 
 
 
 
 
217 
211 
224 
Other (income) expense
 
 
 
 
 
 
 
 
 
22 
25 
Other
 
 
 
 
 
 
 
 
15 
 
 
Income tax expense (benefit)
 
 
 
 
 
 
 
 
(137)
(154)
(136)
Net income
 
 
 
 
 
 
 
 
$ (258)
$ (265)
$ (421)
Segment Information (Net Premiums Earned For Segment By Product) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Sep. 30, 2010
Jun. 30, 2010
Mar. 31, 2010
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Segment Reporting [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Property & All Other
 
 
 
 
 
 
 
 
$ 5,712 
$ 3,898 
$ 4,023 
Casualty
 
 
 
 
 
 
 
 
5,340 
5,752 
5,587 
Life, Accident & Health
 
 
 
 
 
 
 
 
4,335 
3,854 
3,630 
Net premiums earned
3,831 
4,490 
3,757 
3,309 
3,572 
3,422 
3,233 
3,277 
15,387 
13,504 
13,240 
Insurance - North American [Member]
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Property & All Other
 
 
 
 
 
 
 
 
3,174 
1,578 
1,690 
Casualty
 
 
 
 
 
 
 
 
3,380 
3,777 
3,734 
Life, Accident & Health
 
 
 
 
 
 
 
 
357 
296 
260 
Net premiums earned
 
 
 
 
 
 
 
 
6,911 
5,651 
5,684 
Insurance - Overseas General [Member]
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Property & All Other
 
 
 
 
 
 
 
 
2,080 
1,800 
1,787 
Casualty
 
 
 
 
 
 
 
 
1,415 
1,424 
1,420 
Life, Accident & Health
 
 
 
 
 
 
 
 
2,242 
2,016 
1,940 
Net premiums earned
 
 
 
 
 
 
 
 
5,737 
5,240 
5,147 
Global Reinsurance [Member]
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Property & All Other
 
 
 
 
 
 
 
 
458 
520 
546 
Casualty
 
 
 
 
 
 
 
 
545 
551 
433 
Net premiums earned
 
 
 
 
 
 
 
 
1,003 
1,071 
979 
Life [Member]
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Life, Accident & Health
 
 
 
 
 
 
 
 
1,736 
1,542 
1,430 
Net premiums earned
 
 
 
 
 
 
 
 
$ 1,736 
$ 1,542 
$ 1,430 
Segment Information (Net Premiums Earned By Geographic Region) (Details)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Segment Geographical North America [Member]
 
 
 
Segment Reporting [Line Items]
 
 
 
Percentage of net premiums earned by geographic region
61.00% 
61.00% 
63.00% 
Segment Geographical Europe [Member]
 
 
 
Segment Reporting [Line Items]
 
 
 
Percentage of net premiums earned by geographic region
18.00% 
20.00% 
20.00% 
Segment Geographical Asia Pacific Or Far East [Member]
 
 
 
Segment Reporting [Line Items]
 
 
 
Percentage of net premiums earned by geographic region
14.00% 
13.00% 
12.00% 
Segment Geographical Latin America [Member]
 
 
 
Segment Reporting [Line Items]
 
 
 
Percentage of net premiums earned by geographic region
7.00% 
6.00% 
5.00% 
Earnings Per Share (Details) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Sep. 30, 2010
Jun. 30, 2010
Mar. 31, 2010
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Earnings Per Share [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
$ 750 
$ (31)
$ 607 
$ 259 
$ 1,001 
$ 675 
$ 677 
$ 755 
$ 1,585 
$ 3,108 
$ 2,549 
Weighted-average shares outstanding
 
 
 
 
 
 
 
 
338,159,409 
339,685,143 
336,725,625 
Share-based compensation plans
 
 
 
 
 
 
 
 
2,620,815 
1,561,244 
813,669 
Adjusted weighted-average shares outstanding and assumed conversions
 
 
 
 
 
 
 
 
340,780,224 
341,246,387 
337,539,294 
Basic earnings per share
$ 2.22 
$ (0.09)
$ 1.79 
$ 0.77 
$ 2.94 
$ 1.98 
$ 1.99 
$ 2.23 
$ 4.68 
$ 9.15 
$ 7.57 
Diluted earnings per share
$ 2.20 
$ (0.09)
$ 1.77 
$ 0.76 
$ 2.92 
$ 1.97 
$ 1.98 
$ 2.22 
$ 4.65 
$ 9.11 
$ 7.55 
Anti-dilutive share conversions
 
 
 
 
 
 
 
 
111,326 
256,868 
1,230,881 
Related Party Transactions (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Related Party Transactions [Abstract]
 
 
ACE Foundation - Bermuda-Loan
$ 29 
$ 30 
Statutory Financial Information (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Statutory Accounting Practices [Line Items]
 
 
 
Amount of dividends available to be paid in following year without prior approval from the state insurance departments
$ 653 
 
 
Impact of discounting on certain A&E liabilities on statutory capital and surplus
192 
206 
215 
Bermuda Subsidiaries [Member]
 
 
 
Statutory Accounting Practices [Line Items]
 
 
 
Statutory capital and surplus
11,786 
11,484 
9,164 
Statutory net income (loss)
713 
2,175 
2,369 
U.S.Subsidiaries [Member]
 
 
 
Statutory Accounting Practices [Line Items]
 
 
 
Statutory capital and surplus
5,851 
6,279 
5,885 
Statutory net income (loss)
693 
1,025 
904 
Swiss Subsidiaries [Member]
 
 
 
Statutory Accounting Practices [Line Items]
 
 
 
Statutory capital and surplus
578 
518 
468 
Statutory net income (loss)
$ 20 
$ 35 
$ (12)
Information Provided In Connection With Outstanding Debt Of Subsidiaries (Condensed Consolidating Balance Sheet) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2008
Condensed Financial Statements Captions [Line Items]
 
 
 
 
Investments
$ 55,676 
$ 51,407 
 
 
Cash
614 
772 
669 
867 
Insurance and reinsurance balances receivable
4,387 
4,233 
 
 
Reinsurance recoverable on losses and loss expenses
12,389 
12,871 
 
 
Reinsurance recoverable on policy benefits
249 
281 
 
 
Value of business acquired
648 
634 
748 
823 
Goodwill and other intangible assets
4,831 
4,664 
 
 
Total assets
87,505 
83,355 
 
 
Unpaid losses and loss expenses
37,477 
37,391 
37,783 
37,176 
Unearned premiums
6,334 
6,330 
 
 
Future policy benefits
4,274 
3,106 
 
 
Short-term debt
1,251 
1,300 
 
 
Long-term debt
3,360 
3,358 
 
 
Trust preferred securities
309 
309 
 
 
Total liabilities
62,989 
60,381 
 
 
Total shareholders' equity
24,516 
22,974 
19,667 
 
Total liabilities and shareholders' equity
87,505 
83,355 
 
 
Parent guarantor ownership percentage of subsidiary issuer
100.00% 
 
 
 
ACE Limited (Parent Guarantor) [Member]
 
 
 
 
Condensed Financial Statements Captions [Line Items]
 
 
 
 
Investments
33 
47 
 
 
Cash
106 1
308 1
(1)1
(52)1
Investments in subsidiaries
24,055 
22,529 
 
 
Due from subsidiaries and affiliates, net
498 
564 
 
 
Other assets
14 
 
 
Total assets
24,700 
23,462 
 
 
Short-term debt
 
300 
 
 
Other liabilities
184 
188 
 
 
Total liabilities
184 
488 
 
 
Total shareholders' equity
24,516 
22,974 
 
 
Total liabilities and shareholders' equity
24,700 
23,462 
 
 
ACE INA Holdings Inc. (Subsidiary Issuer) [Member]
 
 
 
 
Condensed Financial Statements Captions [Line Items]
 
 
 
 
Investments
28,848 
26,718 
 
 
Cash
382 1
573 1
400 1
442 1
Insurance and reinsurance balances receivable
3,944 
3,710 
 
 
Reinsurance recoverable on losses and loss expenses
17,146 
16,877 
 
 
Reinsurance recoverable on policy benefits
941 
959 
 
 
Value of business acquired
648 
634 
 
 
Goodwill and other intangible assets
4,280 
4,113 
 
 
Other assets
7,181 
7,045 
 
 
Total assets
63,370 
60,629 
 
 
Unpaid losses and loss expenses
30,837 
30,430 
 
 
Unearned premiums
5,416 
5,379 
 
 
Future policy benefits
3,673 
2,495 
 
 
Due to subsidiaries and affiliates, net
316 
555 
 
 
Short-term debt
850 
1,000 
 
 
Long-term debt
3,360 
3,358 
 
 
Trust preferred securities
309 
309 
 
 
Other liabilities
7,769 
7,394 
 
 
Total liabilities
52,530 
50,920 
 
 
Total shareholders' equity
10,840 
9,709 
 
 
Total liabilities and shareholders' equity
63,370 
60,629 
 
 
Other ACE Limited Subsidiaries And Eliminations [Member]
 
 
 
 
Condensed Financial Statements Captions [Line Items]
 
 
 
 
Investments
26,795 2
24,642 2
 
 
Cash
126 1 2
(109)1 2
270 1 2
477 1 2
Insurance and reinsurance balances receivable
443 2
523 2
 
 
Reinsurance recoverable on losses and loss expenses
(4,757)2
(4,006)2
 
 
Reinsurance recoverable on policy benefits
(692)2
(678)2
 
 
Goodwill and other intangible assets
551 2
551 2
 
 
Other assets
1,522 2
1,434 2
 
 
Total assets
23,988 2
22,357 2
 
 
Unpaid losses and loss expenses
6,640 2
6,961 2
 
 
Unearned premiums
918 2
951 2
 
 
Future policy benefits
601 2
611 2
 
 
Due to subsidiaries and affiliates, net
182 2
2
 
 
Short-term debt
401 2
 
 
 
Other liabilities
2,031 2
1,005 2
 
 
Total liabilities
10,773 2
9,537 2
 
 
Total shareholders' equity
13,215 2
12,820 2
 
 
Total liabilities and shareholders' equity
23,988 2
22,357 2
 
 
Consolidating Adjustments [Member]
 
 
 
 
Condensed Financial Statements Captions [Line Items]
 
 
 
 
Investments in subsidiaries
(24,055)3
(22,529)3
 
 
Due from subsidiaries and affiliates, net
(498)3
(564)3
 
 
Total assets
(24,553)3
(23,093)3
 
 
Due to subsidiaries and affiliates, net
(498)3
(564)3
 
 
Total liabilities
(498)3
(564)3
 
 
Total shareholders' equity
(24,055)3
(22,529)3
 
 
Total liabilities and shareholders' equity
(24,553)3
(23,093)3
 
 
ACE Limited Consolidated [Member]
 
 
 
 
Condensed Financial Statements Captions [Line Items]
 
 
 
 
Investments
55,676 
51,407 
 
 
Cash
614 1
772 1
669 1
867 1
Insurance and reinsurance balances receivable
4,387 
4,233 
 
 
Reinsurance recoverable on losses and loss expenses
12,389 
12,871 
 
 
Reinsurance recoverable on policy benefits
249 
281 
 
 
Value of business acquired
648 
634 
 
 
Goodwill and other intangible assets
4,831 
4,664 
 
 
Other assets
8,711 
8,493 
 
 
Total assets
87,505 
83,355 
 
 
Unpaid losses and loss expenses
37,477 
37,391 
 
 
Unearned premiums
6,334 
6,330 
 
 
Future policy benefits
4,274 
3,106 
 
 
Short-term debt
1,251 
1,300 
 
 
Long-term debt
3,360 
3,358 
 
 
Trust preferred securities
309 
309 
 
 
Other liabilities
9,984 
8,587 
 
 
Total liabilities
62,989 
60,381 
 
 
Total shareholders' equity
24,516 
22,974 
 
 
Total liabilities and shareholders' equity
$ 87,505 
$ 83,355 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries (Condensed Consolidating Statement Of Operations) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Sep. 30, 2010
Jun. 30, 2010
Mar. 31, 2010
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
$ 15,372 
$ 13,708 
$ 13,299 
Net premiums earned
3,831 
4,490 
3,757 
3,309 
3,572 
3,422 
3,233 
3,277 
15,387 
13,504 
13,240 
Net investment income
565 
564 
569 
544 
532 
516 
518 
504 
2,242 
2,070 
2,031 
Net realized gains (losses) including OTTI
83 
(760)
(73)
(45)
305 
(50)
168 
(795)
432 
(196)
Losses and loss expenses
2,286 
2,745 
2,226 
2,263 
1,971 
1,887 
1,800 
1,921 
9,520 
7,579 
7,422 
Policy benefits
119 
83 
108 
91 
90 
93 
87 
87 
401 
357 
325 
Interest (income) expense
 
 
 
 
 
 
 
 
250 
224 
225 
Other (income) expense
 
 
 
 
 
 
 
 
73 
(16)
85 
Income tax expense (benefit)
 
 
 
 
 
 
 
 
506 
559 
528 
Net income
750 
(31)
607 
259 
1,001 
675 
677 
755 
1,585 
3,108 
2,549 
ACE Limited (Parent Guarantor) [Member]
 
 
 
 
 
 
 
 
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net investment income
 
 
 
 
 
 
 
 
Equity in earnings of subsidiaries
 
 
 
 
 
 
 
 
1,504 
3,066 
2,636 
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
(4)
(42)
(75)
Policy acquisition costs and administrative expenses
 
 
 
 
 
 
 
 
69 
70 
54 
Interest (income) expense
 
 
 
 
 
 
 
 
 
 
(43)
Interest (income) expense
 
 
 
 
 
 
 
 
(37)
(37)
 
Other (income) expense
 
 
 
 
 
 
 
 
(125)
(123)
Income tax expense (benefit)
 
 
 
 
 
 
 
 
10 
(5)
Net income
 
 
 
 
 
 
 
 
1,585 
3,108 
2,549 
ACE INA Holdings Inc. (Subsidiary Issuer) [Member]
 
 
 
 
 
 
 
 
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
9,081 
8,195 
7,407 
Net premiums earned
 
 
 
 
 
 
 
 
9,082 
7,940 
7,411 
Net investment income
 
 
 
 
 
 
 
 
1,096 
1,011 
1,003 
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
62 
303 
75 
Losses and loss expenses
 
 
 
 
 
 
 
 
5,889 
4,910 
4,620 
Policy benefits
 
 
 
 
 
 
 
 
192 
148 
84 
Policy acquisition costs and administrative expenses
 
 
 
 
 
 
 
 
2,520 
2,372 
2,180 
Interest (income) expense
 
 
 
 
 
 
 
 
 
 
261 
Interest (income) expense
 
 
 
 
 
 
 
 
267 
251 
 
Other (income) expense
 
 
 
 
 
 
 
 
135 
95 
44 
Income tax expense (benefit)
 
 
 
 
 
 
 
 
422 
447 
395 
Net income
 
 
 
 
 
 
 
 
815 
1,031 
905 
Other ACE Limited Subsidiaries And Eliminations [Member]
 
 
 
 
 
 
 
 
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
6,291 1
5,513 1
5,892 1
Net premiums earned
 
 
 
 
 
 
 
 
6,305 1
5,564 1
5,829 1
Net investment income
 
 
 
 
 
 
 
 
1,144 1
1,058 1
1,027 1
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
(853)1
171 1
(196)1
Losses and loss expenses
 
 
 
 
 
 
 
 
3,631 1
2,669 1
2,802 1
Policy benefits
 
 
 
 
 
 
 
 
209 1
209 1
241 1
Policy acquisition costs and administrative expenses
 
 
 
 
 
 
 
 
1,910 1
1,753 1
1,707 1
Interest (income) expense
 
 
 
 
 
 
 
 
 
 
1
Interest (income) expense
 
 
 
 
 
 
 
 
20 1
10 1
 
Other (income) expense
 
 
 
 
 
 
 
 
63 1
12 1
34 1
Income tax expense (benefit)
 
 
 
 
 
 
 
 
74 1
105 1
138 1
Net income
 
 
 
 
 
 
 
 
689 1
2,035 1
1,731 1
Consolidating Adjustments [Member]
 
 
 
 
 
 
 
 
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Equity in earnings of subsidiaries
 
 
 
 
 
 
 
 
(1,504)2
(3,066)2
(2,636)2
Net income
 
 
 
 
 
 
 
 
(1,504)2
(3,066)2
(2,636)2
ACE Limited Consolidated [Member]
 
 
 
 
 
 
 
 
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
 
 
 
 
 
 
 
15,372 
13,708 
13,299 
Net premiums earned
 
 
 
 
 
 
 
 
15,387 
13,504 
13,240 
Net investment income
 
 
 
 
 
 
 
 
2,242 
2,070 
2,031 
Net realized gains (losses) including OTTI
 
 
 
 
 
 
 
 
(795)
432 
(196)
Losses and loss expenses
 
 
 
 
 
 
 
 
9,520 
7,579 
7,422 
Policy benefits
 
 
 
 
 
 
 
 
401 
357 
325 
Policy acquisition costs and administrative expenses
 
 
 
 
 
 
 
 
4,499 
4,195 
3,941 
Interest (income) expense
 
 
 
 
 
 
 
 
 
 
225 
Interest (income) expense
 
 
 
 
 
 
 
 
250 
224 
 
Other (income) expense
 
 
 
 
 
 
 
 
73 
(16)
85 
Income tax expense (benefit)
 
 
 
 
 
 
 
 
506 
559 
528 
Net income
 
 
 
 
 
 
 
 
$ 1,585 
$ 3,108 
$ 2,549 
Information Provided In Connection With Outstanding Debt Of Subsidiaries (Condensed Consolidating Statement Of Cash Flows) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
Net cash flows from operating activities
$ 3,470 
$ 3,546 
$ 3,335 
Purchases of fixed maturities held to maturity
(340)
(616)
(472)
Purchases of equity securities
(309)
(794)
(354)
Sales of fixed maturities held to maturity
 
 
11 
Sales of equity securities
376 
774 
1,272 
Maturities and redemptions of fixed maturities available for sale
3,720 
3,660 
3,404 
Maturities and redemptions of fixed maturities held to maturity
1,279 
1,353 
514 
Net derivative instruments settlements
(67)
(109)
(92)
Acquisition of subsidiaries (net of cash acquired)
(606)
(1,139)
 
Net cash flows used for investing activities
(3,036)
(4,181)
(3,224)
Dividends paid on Common Shares
(459)
(435)
(388)
Common Shares repurchased
(195)
(235)
 
Tax (expense) benefit on share-based compensation expense
(1)
Net cash flows (used for) from financing activities
(565)
732 
(321)
Effect of foreign currency rate changes on cash and cash equivalents
(27)
12 
Net (decrease) increase in cash
(158)
103 
(198)
Cash - beginning of year
772 
669 
867 
Cash - end of year
614 
772 
669 
Cash acquired from acquisition of subsidiary
91 
80 
 
ACE Limited (Parent Guarantor) [Member]
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
Net cash flows from operating activities
762 
(176)
594 
Purchases of fixed maturities available for sale
 
(1)
 
Sales of fixed maturities available for sale
 
88 
Net derivative instruments settlements
(3)
(3)
 
Capital contribution to subsidiaries
(385)
(290)
(90)
Advances (to) from affiliates
41 
851 
(174)
Other
 
 
(4)
Net cash flows used for investing activities
(338)
557 
(180)
Dividends paid on Common Shares
(459)
(435)
(388)
Net proceeds from issuance (repayment) of short-term debt
(300)
300 
 
Proceeds from share-based compensation plans
133 
63 
25 
Net cash flows (used for) from financing activities
(626)
(72)
(363)
Net (decrease) increase in cash
(202)
309 
51 
Cash - beginning of year
308 1
(1)1
(52)1
Cash - end of year
106 1
308 1
(1)1
ACE INA Holdings Inc. (Subsidiary Issuer) [Member]
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
Net cash flows from operating activities
1,053 
1,798 
1,888 
Purchases of fixed maturities available for sale
(12,203)
(13,785)
(16,877)
Purchases of fixed maturities held to maturity
(338)
(615)
(457)
Purchases of equity securities
(157)
(107)
(186)
Sales of fixed maturities available for sale
9,718 
10,225 
12,650 
Sales of fixed maturities held to maturity
 
 
10 
Sales of equity securities
354 
17 
544 
Maturities and redemptions of fixed maturities available for sale
1,784 
1,845 
1,792 
Maturities and redemptions of fixed maturities held to maturity
933 
1,142 
410 
Net derivative instruments settlements
(24)
(10)
(6)
Acquisition of subsidiaries (net of cash acquired)
(569)
(1,139)
 
Other
(420)
(253)
(14)
Net cash flows used for investing activities
(922)
(2,680)
(2,134)
Net proceeds from issuance (repayment) of short-term debt
(150)
841 
(466)
Net proceeds from issuance of long-term debt
 
199 
500 
Advances (to) from affiliates
(149)
156 
Tax (expense) benefit on share-based compensation expense
 
Net cash flows (used for) from financing activities
(296)
1,043 
196 
Effect of foreign currency rate changes on cash and cash equivalents
(26)
12 
Net (decrease) increase in cash
(191)
173 
(42)
Cash - beginning of year
573 1
400 1
442 1
Cash - end of year
382 1
573 1
400 1
Other ACE Limited Subsidiaries And Eliminations [Member]
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
Net cash flows from operating activities
2,395 2
2,124 2
1,203 2
Purchases of fixed maturities available for sale
(12,375)2
(17,470)2
(20,383)2
Purchases of fixed maturities held to maturity
(2)2
(1)2
(15)2
Purchases of equity securities
(152)2
(687)2
(168)2
Sales of fixed maturities available for sale
8,244 2
14,054 2
16,916 2
Sales of fixed maturities held to maturity
 
 
2
Sales of equity securities
22 2
757 2
728 2
Maturities and redemptions of fixed maturities available for sale
1,936 2
1,815 2
1,612 2
Maturities and redemptions of fixed maturities held to maturity
346 2
211 2
104 2
Net derivative instruments settlements
(40)2
(96)2
(86)2
Acquisition of subsidiaries (net of cash acquired)
(37)2
 
 
Other
(62)2
(80)2
117 2
Net cash flows used for investing activities
(2,120)2
(1,497)2
(1,174)2
Common Shares repurchased
(195)2
(235)2
 
Net proceeds from issuance (repayment) of short-term debt
400 2
 
 
Advances (to) from affiliates
108 2
(854)2
18 2
Dividends to parent company
(740)2
(200)2
(350)2
Capital contribution from parent
385 2
290 2
90 2
Tax (expense) benefit on share-based compensation expense
2
(1)2
2
Net cash flows (used for) from financing activities
(39)2
(1,000)2
(240)2
Effect of foreign currency rate changes on cash and cash equivalents
(1)2
(6)2
2
Net (decrease) increase in cash
235 2
(379)2
(207)2
Cash - beginning of year
(109)1 2
270 1 2
477 1 2
Cash - end of year
126 1 2
(109)1 2
270 1 2
Consolidating Adjustments [Member]
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
Net cash flows from operating activities
(740)3
(200)3
(350)3
Capital contribution to subsidiaries
385 3
290 3
90 3
Advances (to) from affiliates
(41)3
(851)3
174 3
Net cash flows used for investing activities
344 3
(561)3
264 3
Advances (to) from affiliates
41 3
851 3
(174)3
Dividends to parent company
740 3
200 3
350 3
Capital contribution from parent
(385)3
(290)3
(90)3
Net cash flows (used for) from financing activities
396 3
761 3
86 3
ACE Limited Consolidated [Member]
 
 
 
Information Provided In Connection With Outstanding Debt Of Subsidiaries [Line Items]
 
 
 
Net cash flows from operating activities
3,470 
3,546 
3,335 
Purchases of fixed maturities available for sale
(24,578)
(31,256)
(37,260)
Purchases of fixed maturities held to maturity
(340)
(616)
(472)
Purchases of equity securities
(309)
(794)
(354)
Sales of fixed maturities available for sale
17,971 
24,279 
29,654 
Sales of fixed maturities held to maturity
 
 
11 
Sales of equity securities
376 
774 
1,272 
Maturities and redemptions of fixed maturities available for sale
3,720 
3,660 
3,404 
Maturities and redemptions of fixed maturities held to maturity
1,279 
1,353 
514 
Net derivative instruments settlements
(67)
(109)
(92)
Acquisition of subsidiaries (net of cash acquired)
(606)
(1,139)
 
Other
(482)
(333)
99 
Net cash flows used for investing activities
(3,036)
(4,181)
(3,224)
Dividends paid on Common Shares
(459)
(435)
(388)
Common Shares repurchased
(195)
(235)
 
Net proceeds from issuance (repayment) of short-term debt
(50)
1,141 
(466)
Proceeds from share-based compensation plans
133 
63 
25 
Net proceeds from issuance of long-term debt
 
199 
500 
Tax (expense) benefit on share-based compensation expense
(1)
Net cash flows (used for) from financing activities
(565)
732 
(321)
Effect of foreign currency rate changes on cash and cash equivalents
(27)
12 
Net (decrease) increase in cash
(158)
103 
(198)
Cash - beginning of year
772 1
669 1
867 1
Cash - end of year
$ 614 1
$ 772 1
$ 669 1
Condensed Unaudited Quarterly Financial Data (Schedule Of Condensed Unaudited Quarterly Financial Data) (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Sep. 30, 2010
Jun. 30, 2010
Mar. 31, 2010
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Condensed Unaudited Quarterly Financial Data [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Net premiums earned
$ 3,831 
$ 4,490 
$ 3,757 
$ 3,309 
$ 3,572 
$ 3,422 
$ 3,233 
$ 3,277 
$ 15,387 
$ 13,504 
$ 13,240 
Net investment income
565 
564 
569 
544 
532 
516 
518 
504 
2,242 
2,070 
2,031 
Net realized gains (losses) including OTTI
83 
(760)
(73)
(45)
305 
(50)
168 
(795)
432 
(196)
Total revenues
4,479 
4,294 
4,253 
3,808 
4,409 
3,888 
3,760 
3,949 
16,834 
16,006 
15,075 
Losses and loss expenses
2,286 
2,745 
2,226 
2,263 
1,971 
1,887 
1,800 
1,921 
9,520 
7,579 
7,422 
Policy benefits
119 
83 
108 
91 
90 
93 
87 
87 
401 
357 
325 
Net income
$ 750 
$ (31)
$ 607 
$ 259 
$ 1,001 
$ 675 
$ 677 
$ 755 
$ 1,585 
$ 3,108 
$ 2,549 
Basic earnings per share
$ 2.22 
$ (0.09)
$ 1.79 
$ 0.77 
$ 2.94 
$ 1.98 
$ 1.99 
$ 2.23 
$ 4.68 
$ 9.15 
$ 7.57 
Diluted earnings per share
$ 2.20 
$ (0.09)
$ 1.77 
$ 0.76 
$ 2.92 
$ 1.97 
$ 1.98 
$ 2.22 
$ 4.65 
$ 9.11 
$ 7.55 
Schedule II - Condensed Financial Information Of Registrant (Condensed Balance Sheets) (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2008
Short-term investments at fair value
$ 2,301 
$ 1,983 
 
 
Other investments, at cost
2,314 
1,692 
 
 
Total investments
55,676 
51,407 
 
 
Cash
614 
772 
669 
867 
Other assets
2,495 
2,196 
 
 
Total assets
87,505 
83,355 
 
 
Accounts payable, accrued expenses, and other liabilities
3,948 
2,958 
 
 
Short-term debt
1,251 
1,300 
 
 
Total liabilities
62,989 
60,381 
 
 
Common Shares
10,095 
10,161 
 
 
Common Shares in treasury
(327)
(330)
 
 
Additional paid-in capital
5,326 
5,623 
 
 
Retained earnings
7,511 
5,926 
 
 
Deferred compensation obligation
 
 
 
Accumulated other comprehensive income
1,911 
1,594 
 
 
Common Shares issued to employee trust
 
(2)
 
 
Total shareholders' equity
24,516 
22,974 
19,667 
 
Total liabilities and shareholders' equity
87,505 
83,355 
 
 
ACE Limited (Parent Guarantor) [Member]
 
 
 
 
Investments in subsidiaries and affiliates on equity basis
24,055 
22,529 
 
 
Short-term investments at fair value
10 
 
 
Other investments, at cost
32 
37 
 
 
Total investments
24,088 
22,576 
 
 
Cash
106 
308 
(1)
(52)
Due from subsidiaries and affiliates, net
498 
564 
 
 
Other assets
14 
 
 
Total assets
24,700 
23,462 
 
 
Accounts payable, accrued expenses, and other liabilities
65 
76 
 
 
Dividends payable
119 
112 
 
 
Short-term debt
 
300 
 
 
Total liabilities
184 
488 
 
 
Common Shares
10,095 
10,161 
 
 
Common Shares in treasury
(327)
(330)
 
 
Additional paid-in capital
5,326 
5,623 
 
 
Retained earnings
7,511 
5,926 
 
 
Deferred compensation obligation
 
 
 
Accumulated other comprehensive income
1,911 
1,594 
 
 
Common Shares issued to employee trust
 
(2)
 
 
Total shareholders' equity
24,516 
22,974 
 
 
Total liabilities and shareholders' equity
$ 24,700 
$ 23,462 
 
 
Schedule II - Condensed Financial Information Of Registrant (Condensed Statements Of Operations) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Sep. 30, 2010
Jun. 30, 2010
Mar. 31, 2010
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Investment income, including intercompany interest income
$ 565 
$ 564 
$ 569 
$ 544 
$ 532 
$ 516 
$ 518 
$ 504 
$ 2,242 
$ 2,070 
$ 2,031 
Net realized gains (losses)
83 
(760)
(73)
(45)
305 
(50)
168 
(795)
432 
(196)
Total revenues
4,479 
4,294 
4,253 
3,808 
4,409 
3,888 
3,760 
3,949 
16,834 
16,006 
15,075 
Administrative and other (income) expense
 
 
 
 
 
 
 
 
2,052 
1,858 
1,811 
Interest expense (benefit)
 
 
 
 
 
 
 
 
250 
224 
225 
Total expenses
 
 
 
 
 
 
 
 
14,743 
12,339 
11,998 
Net income
750 
(31)
607 
259 
1,001 
675 
677 
755 
1,585 
3,108 
2,549 
ACE Limited (Parent Guarantor) [Member]
 
 
 
 
 
 
 
 
 
 
 
Investment income, including intercompany interest income
 
 
 
 
 
 
 
 
39 
38 
44 
Equity in net income of subsidiaries and affiliates
 
 
 
 
 
 
 
 
1,504 
3,066 
2,636 
Net realized gains (losses)
 
 
 
 
 
 
 
 
(4)
(42)
(75)
Total revenues
 
 
 
 
 
 
 
 
1,539 
3,062 
2,605 
Administrative and other (income) expense
 
 
 
 
 
 
 
 
(56)
(53)
61 
Interest expense (benefit)
 
 
 
 
 
 
 
 
10 
(5)
Total expenses
 
 
 
 
 
 
 
 
(46)
(46)
56 
Net income
 
 
 
 
 
 
 
 
$ 1,585 
$ 3,108 
$ 2,549 
Schedule II - Condensed Financial Information Of Registrant (Condensed Statements Of Cash Flows) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Net cash flows from operating activities
$ 3,470 
$ 3,546 
$ 3,335 
Purchases of fixed maturities available for sale
(23,823)
(29,985)
(31,789)
Sales of fixed maturities available for sale
17,176 
23,096 
23,693 
Net derivative instruments settlements
(67)
(109)
(92)
Net cash flows from (used for) investing activities
(3,036)
(4,181)
(3,224)
Dividends paid on Common Shares
(459)
(435)
(388)
Net cash flows used for financing activities
(565)
732 
(321)
Net increase (decrease) in cash
(158)
103 
(198)
Cash - beginning of year
772 
669 
867 
Cash - end of year
614 
772 
669 
ACE Limited (Parent Guarantor) [Member]
 
 
 
Net cash flows from operating activities
762 
(176)
594 
Purchases of fixed maturities available for sale
 
(1)
 
Sales of fixed maturities available for sale
 
88 
Net derivative instruments settlements
(3)
(3)
 
Capital contribution to subsidiaries
(385)
(290)
(90)
Advances (to) from affiliates
41 
851 
(174)
Other
 
 
(4)
Net cash flows from (used for) investing activities
(338)
557 
(180)
Dividends paid on Common Shares
(459)
(435)
(388)
Net proceeds from issuance (repayment) of short-term debt
(300)
300 
 
Proceeds from share-based compensation plans
133 
63 
25 
Net cash flows used for financing activities
(626)
(72)
(363)
Net increase (decrease) in cash
(202)
309 
51 
Cash - beginning of year
308 
(1)
(52)
Cash - end of year
$ 106 
$ 308 
$ (1)
Schedule IV - Supplemental Information Concerning Reinsurance (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Supplemental Information Concerning Reinsurance [Abstract]
 
 
 
Direct Amount
$ 17,534 
$ 15,780 
$ 15,415 
Ceded To Other Companies
5,496 
5,792 
5,943 
Assumed From Other Companies
3,349 
3,516 
3,768 
Net Amount
$ 15,387 
$ 13,504 
$ 13,240 
Percentage of Amount Assumed to Net
22.00% 
26.00% 
28.00% 
Schedule VI - Supplementary Information Concerning Property And Casualty Operations (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Supplementary Information Concerning Property And Casualty Operations [Abstract]
 
 
 
Deferred Policy Acquisition Costs
$ 1,668 
$ 1,581 
$ 1,396 
Net Reserves for Unpaid Losses and Loss Expenses
25,875 
25,242 
25,038 
Unearned Premiums
6,334 
6,330 
6,067 
Net Premiums Earned
14,645 
12,981 
12,713 
Net Investment Income
2,108 
1,996 
1,940 
Net Losses and Loss Expenses Incurred Related to Current Year
10,076 
8,082 
7,998 
Net Losses and Loss Expenses Incurred Related to Prior Year
(556)
(503)
(576)
Amortization of Deferred Policy Acquisition Costs
2,347 
2,252 
2,076 
Net Paid Losses and Loss Expenses
8,866 
7,413 
6,948 
Net Premiums Written
$ 14,582 
$ 13,166 
$ 12,735