ACE Reports Second Quarter 2010 Net Income of $677 Million, up 27%

ZURICH, Switzerland – 28 July, 2010 - ACE Limited (NYSE: ACE) today reported net income for the quarter ended 30 June, 2010, of $1.98 per share, compared with $1.58 per share for the same quarter last year.⁽¹⁾ Income excluding net realized gains (losses) was $2.01 per share, compared with $2.09 per share for the same quarter last year.⁽²⁾ Book value increased $774 million during the quarter, up 4% from 31 March, 2010. Book value per share now stands at $63.20. Annualized operating return on average equity for the quarter was 13.8%.⁽³⁾ The property and casualty (P&C) combined ratio for the quarter was 89.7%.

Net income for the six months ended 30 June, 2010, was $4.21 per share, compared with $3.27 per share for 2009. For the six months ended 30 June, 2010, income excluding net realized gains (losses) was $3.72 per share, compared with $4.08 per share for 2009. Book value increased $1.7 billion, up 9% during the six months ended 30 June, 2010. The P&C combined ratio for the six months ended 30 June, 2010, was 91.2%.

Evan G. Greenberg, Chairman and Chief Executive Officer of ACE Limited, commented: “ACE had an excellent second quarter and first half. In the quarter, we produced operating income of $688 million and grew book value per share by almost 4%, and 8% year to date. Our operating ROE for the quarter was 13.8%.

“For the industry, this was an active quarter for natural catastrophes in the U.S., and for ACE, our total catastrophe losses were double the amount from the prior year. I believe our combined ratio of 89.7% speaks to our risk management, balance of operations, overall reserve strength and underlying underwriting performance.

“Slow economic recovery in the major developed economies of the United States, Europe and Japan and competitive global insurance markets impacted total premium growth, and I expect these conditions will be with us for some time. However, we continue to identify and realize opportunities for profitable growth as a result of our on-the-ground local presence globally and a broad specialty-oriented product capability.

“We are affirming the guidance we provided in January, which was $6.25 - $6.75 per share of operating income, and now expect to be at the top end of the range.”

Operating highlights for the quarter ended 30 June, 2010, were as follows: ⁽¹⁾

Net premiums written were flat and net premiums earned decreased 1%. Excluding the impact of foreign exchange, net premiums written decreased 2% while net premiums earned decreased 3%. Adjusting for a large loss portfolio transaction written in 2009 and lower crop written premium than in 2009, the growth rate in constant dollars was 2%.

Total catastrophe losses were $81 million including reinstatement premiums compared with $31 million for the second quarter of 2009. Net after-tax catastrophe losses were $62 million compared with $24 million for the second quarter of 2009.

Favorable prior period development pre-tax was $149 million, compared with $158 million in 2009.

The P&C combined ratio was 89.7% compared with 87.7% last year.

P&C underwriting income was $294 million compared with $355 million in 2009.

Operating cash flow was $868 million.

Net loss reserves decreased $286 million. Excluding foreign exchange valuation, net loss reserves decreased $33 million.

Net investment income increased 2% to $518 million.

Annualized operating return on average equity was 13.8%.⁽³⁾

Book value per share⁽⁴⁾ increased 4% from $60.94 at 31 March, 2010, to $63.20, and increased 8% from $58.44 at 31 December, 2009.

Tangible book value per share⁽⁴⁾ increased 5% from $49.48 at 31 March, 2010, to $51.88, and increased 11% from $46.76 at 31 December, 2009.

Net realized and unrealized gains after tax from our investment portfolio totaled approximately $426 million. Net realized losses from derivative accounting related to the guaranteed minimum income benefits (GMIBs) of our life reinsurance business, net of associated hedges, were approximately $160 million due to the increase in fair value liability of the variable annuity business, driven by decreases in interest rates and equity markets.

Details of our financial results for our business segments are available in the ACE Limited Financial Supplement. Key segment items for the quarter ended 30 June, 2010, include:

1. Insurance-North American: Net premiums written decreased 1%. The combined ratio was 90.3% compared with 90.0%.

2. Insurance-Overseas General: Net premiums written increased 3%. Adjusting for the impact of foreign exchange, they decreased 1%. The combined ratio was 90.9% compared with 89.8%.

3. Global Reinsurance: Net premiums written decreased 12%. The combined ratio was 64.7% compared with 48.2%.

4. Life: Net premiums written increased 7%. Operating income increased to $78 million compared with $66 million.  

Please refer to the ACE Limited Financial Supplement dated 30 June, 2010, which is posted on the company's website in the Investor Information section, and access Financial Reports for more detailed information on individual segment performance, together with additional disclosure on reinsurance recoverable, loss reserves, investment portfolio, and capital structure. The URL reference is: http://media.corporate-ir.net/media_files/irol/10/100907/fin_supp_june_30_2010.xls.

ACE will host its second quarter earnings conference call and webcast on Wednesday, 28 July, 2010, beginning at 8:30 a.m. ET. The earnings conference call will be available via live and archived webcast at www.acelimited.com or by dialing 888-428-9507 (within the United States) or 719-325-2192 (international); passcode 6802447. Please refer to the ACE Limited website in the Investor Information section under Calendar of Events for details. A replay of the call will be available for approximately one month. To listen to the replay, dial: 888-203-1112 (in the United States) or 719-457-0820 (international); passcode 6802447.

Celebrating 25 years of insuring progress, the ACE Group is a global leader in insurance and reinsurance serving a diverse group of clients. Headed by ACE Limited (NYSE:ACE), a component of the S&P 500 stock index, the ACE Group conducts its business on a worldwide basis with operating subsidiaries in more than 50 countries. Additional information can be found at: www.acegroup.com.

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