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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2000
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File No. 1-11778
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ACE LIMITED
(Exact name of registrant as specified in its charter)
Cayman Islands 98-0091805
(Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
The ACE Building
30 Woodbourne Avenue
Hamilton HM 08
Bermuda
(441) 295-5200
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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Securities registered pursuant to Section 12(b) of the Act:
Name of Exchange
Title of Each Class on which Registered
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Ordinary Shares, par value $0.041666667 per share New York Stock Exchange
ACE Capital Trust I 8.875 percent Trust Originated
Preferred Securities mature 2029 New York Stock Exchange
Capital Re LLC 7.65 percent Trust Preferred
Securities of Subsidiary Trust (and registrant's
guaranty with respect thereto) mature 2044 New York Stock Exchange
ACE Limited 8.25 percent FELINE PRIDES mature 2003 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference into Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
As of March 15, 2001, there were 232,513,623 Ordinary Shares par value
$0.041666667 of the Registrant outstanding and the aggregate market value of
voting stock held by non-affiliates at such date was approximately
$8.5 billion. For the purposes of this computation, shares held by directors
(and shares held by any entities in which they serve as officers) and officers
of the registrant have been excluded. Such exclusion is not intended, nor shall
it be deemed, to be an admission that such persons are affiliates of the
registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of registrant's definitive proxy statement relating to its
Annual General Meeting of Shareholders scheduled to be held on May 11, 2001,
are incorporated by reference into Part III of this report and certain portions
of the 2000 Annual Report to Shareholders are incorporated by reference into
Parts II and IV of this report.
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ACE LIMITED
INDEX TO 10-K
Page
----
PART I
Item 1. Business...................................................... 1
Item 2. Properties.................................................... 22
Item 3. Legal Proceedings............................................. 23
Item 4. Submission of Matters to a Vote of Security Holders........... 23
PART II
Item 5. Market for the Registrant's Ordinary Shares and Related
Stockholder Matters........................................... 27
Item 6. Selected Financial Data....................................... 27
Item 7. Management's Discussion and Analysis of Results of Operations
and Financial Condition....................................... 28
Item 7A Quantitative and Qualitative Disclosures about Market Risk.... 28
Item 8. Financial Statements and Supplementary Data................... 28
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure...................................... 28
PART III
Item 10. Directors and Executive Officers of the Registrant............ 29
Item 11. Executive Compensation........................................ 29
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................... 29
Item 13. Certain Relationships and Related Transactions................ 29
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form
8-K........................................................... 30
1
PART I
Item 1. Business
Safe Harbor Disclosure
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Any written or oral statements made by
or on behalf of the Company may include forward-looking statements which
reflect the Company's current views with respect to future events and financial
performance. These forward-looking statements are subject to certain
uncertainties and other factors that could cause actual results to differ
materially from such statements. These uncertainties and other factors (which
are described in more detail elsewhere herein and in documents filed by the
Company with the Securities and Exchange Commission) include, but are not
limited to, (i) uncertainties relating to government and regulatory policies
(such as subjecting the Company to new insurance regulation or taxation in
additional jurisdictions or amending or revoking or enacting any laws,
regulations or treaties affecting the Company's current operations), (ii) the
occurrence of catastrophic events or other insured or reinsured events with a
frequency or severity exceeding the Company's estimates, (iii) legal,
regulatory, and legislative developments, (iv) the uncertainties of the loss
reserving process including the difficulties associated with assessing
environmental and latent injuries, (v) the actual amount of new and renewal
business and market acceptance of the Company's products, (vi) loss of the
services of any of the Company's executive officers, (vii) changing rates of
inflation and other economic conditions, (viii) losses due to foreign currency
exchange rate fluctuations, (ix) the ability to collect reinsurance
recoverables, (x) the competitive environment in which the Company operates,
related trends and associated pricing pressures, market perception, and
developments, (xi) the impact of mergers and acquisitions and new initiatives,
including the ability to successfully integrate acquired, new or expanded
businesses and achieve cost savings, reduce volatility of earnings, competing
demands for ACE's capital and the risk of undisclosed liabilities, (xii)
developments in global financial markets, including interest rate changes which
could affect the Company's investment portfolio and financing plans, (xiii)
risks associated with the introduction of new products and services, (xiv) the
ability of technology to perform as anticipated, and (xv) the amount of
dividends received from subsidiaries. The words "believe", "anticipate",
"estimate", "project", "plan", "expect", "intend", "hope", "will likely result"
or "will continue" and variations thereof and similar expressions identify
forward-looking statements. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of their dates. The
Company undertakes no obligation to publicly update or revise any forward-
looking statements, whether as a result of new information, future events or
otherwise.
General
ACE Limited ("ACE") is a holding company incorporated with limited liability
under the Cayman Islands Companies Law. ACE maintains its business office in
Bermuda. ACE, through its various subsidiaries, provides a broad range of
insurance and reinsurance products to insureds in the United States and almost
50 other countries. In addition, ACE, through ACE Global Markets, provides
funds at Lloyd's, primarily in the form of letters of credit, to support
underwriting capacity for Lloyd's syndicates managed by Lloyd's managing
agencies which are wholly owned subsidiaries of ACE. At December 31, 2000, the
Company had total assets of $31.7 billion and shareholders' equity of $5.4
billion. The Company derives its revenue principally from premiums, fees and
investment income. ACE operates through six business segments: ACE Bermuda, ACE
Global Markets, ACE Global Reinsurance, ACE USA, ACE International and ACE
Financial Services. Unless the context otherwise indicates, the term "Company"
refers to one or more of ACE and its consolidated subsidiaries.
The Company's long-term business strategy focuses on achieving underwriting
profits and providing value to its clients and shareholders through the
utilization of its substantial capital base within the insurance and
reinsurance markets. As part of this strategy, the Company has continued to
review and expand, where appropriate, its product portfolio. In addition, the
Company has made a number of strategic acquisitions and entered into strategic
alliances to diversify its product lines, both geographically and by product
type.
1
Acquisitions
The Company acquired Corporate Officers & Directors Assurance ("CODA") in
1993 which provides professional lines insurance.
The Company continued its strategic diversification with the acquisition in
March 1996 of Methuen Group Limited ("Methuen"), and in July 1996 of Tempest
Reinsurance Company Limited ("ACE Tempest Re"), a leading Bermuda-based
property catastrophe reinsurer. Also in November 1996, the Company acquired
Ockham Worldwide Holdings plc which was renamed ACE London Holdings Limited.
Both Methuen and ACE London were holding companies that owned Lloyd's managing
agencies.
In March 1997, the Company, together with two other insurance companies,
formed Sovereign Risk Insurance Limited ("Sovereign"), a Bermuda-based managing
general agency, to provide underwriting services to the three organizations for
political risk insurance coverage. Sovereign issues subscription policies with
the Company assuming 50 percent of each risk underwritten. In 1999, ACE Bermuda
and one of the other investors bought out the third investor.
In January 1995, the Company formed ACE European Markets Reinsurance Limited
("AEMRL"). In September 1997, AEMRL formed ACE European Markets Insurance
Limited ("AEMIL"). Both companies operate in the International Financial
Services Centre in Dublin, Ireland. Additionally, AEMIL has an insurance
license to write all 18 classes of non-life insurance in all member states of
the European Union. Both companies provide flexibility mainly to European
corporations that wish to access the Company's products using different
structures.
On January 2, 1998, the Company, through a U.S. holding company, ACE US
Holdings, acquired the Westchester Specialty Group. In connection with the
acquisition, National Indemnity Company, a subsidiary of Berkshire Hathaway
Inc., provided $750 million (75 percent quota share of $1 billion) of
reinsurance protection to ACE US Holdings with respect to its loss reserves for
the 1996 and prior accident years.
On April 1, 1998, the Company acquired CAT Limited ("CAT"), a privately
held, Bermuda-based property catastrophe reinsurer. This acquisition increased
the Company's already significant participation in the international property
catastrophe reinsurance market. On January 1, 1999 CAT was merged into ACE
Tempest Re.
On July 9, 1998, the Company acquired Tarquin Limited ("Tarquin"), a UK-
based holding company which owned Lloyd's managing agency Charman Underwriting
Agencies Ltd. ("CUAL") and Tarquin Underwriting Limited, its corporate capital
provider. CUAL managed syndicates 488 and 2488.
On July 2, 1999, the Company acquired the international and domestic
property and casualty businesses of CIGNA Corporation ("CIGNA"). Under the
terms of the agreement the Company, through a U.S. holding company, ACE INA
Holdings Inc. ("ACE INA"), acquired CIGNA's domestic property and casualty
insurance operations including its run-off business and also its international
property and casualty insurance companies and branches, including most of the
accident and health business written through those companies. In connection
with the acquisition CIGNA agreed to provide a guarantee to ACE to indemnify
against unanticipated increases in recorded reserves for losses and loss
adjustment expenses of certain subsidiaries being acquired by ACE. CIGNA had
the option to replace its guarantee with reinsurance obtained from a mutually
agreed upon third party reinsurer. CIGNA exercised this option and replaced its
guarantee with reinsurance by directing certain subsidiaries being acquired to
transfer $1.25 billion of investments to National Indemnity Company, a
subsidiary of Berkshire Hathaway Inc., for aggregate coverage of $2.5 billion.
2
On December 30, 1999, the Company acquired Capital Re Corporation. Following
the acquisition, Capital Re Corporation was renamed ACE Financial Services.
This transaction added significant depth and expertise to ACE's financial
reinsurance capabilities and represents a strategic complement to the Company's
diversified portfolio by fully establishing ACE as a key financial guaranty
reinsurer.
Information About Segments
Presentation: The business segments presented in this document have been
determined under the Statement of Financial Accounting Standard No 131,
"Disclosures about Segments of an Enterprise and Related Information" ("FAS
131") which was adopted by the Company as of December 31, 1999. FAS 131
established new standards for defining how operating segments are determined.
Prior period information has been restated based on the new requirements.
Competition: Competitive forces in the international property and casualty
insurance and reinsurance business are substantial. Results are a function of
underwriting and investment performance, direct costs associated with the
delivery of insurance products, including the costs of regulation, the
frequency and severity of both natural and man-made disasters, as well as
inflation (actual, social and judicial), which impact loss costs. Decisions
made by insurers concerning their mix of business (offering certain types of
coverage but declining to write other types), their methods of operations and
the quality and allocation of their assets (including any reinsurance
recoverable balances) will all affect their competitive position. The relative
size and reputation of insurers may influence purchasing decisions of present
and prospective customers and will contribute to both geographic and industrial
sector market penetration. Oversupply of available capital has historically had
the effect of encouraging competition and depressing prices. The Company's
competitive position in the property and casualty insurance industry is
influenced by all of these factors. Individual competitive information by
segment is presented in the segment presentations.
Segment Analysis of Gross Premiums Written: The following table sets forth
an analysis of gross premiums written by segment for the years ended December
31, 2000 and 1999, and for the year ended September 30, 1998:
Year ended Year ended Year ended
December 31, December 31, September 30,
2000 1999 1998
Gross Premiums Gross Premiums Gross Premiums
Written Percent Written Percent Written Percent
-------------- ------- -------------- ------- -------------- -------
(in millions of U.S. dollars)
ACE Bermuda............. $ 598 8% $ 553 14% $ 520 42%
ACE Global Markets(1)... 1,064 14% 635 16% 438 35%
ACE Global
Reinsurance(2)......... 191 2% 182 5% 124 10%
ACE USA(3).............. 3,380 45% 1,567 41% 160 13%
ACE International(4).... 2,027 27% 932 24% -- --
ACE Financial
Services(5)............ 327 4% -- -- -- --
------ --- ------ --- ------ ---
$7,587 100% $3,869 100% $1,242 100%
====== === ====== === ====== ===
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(1) On July 9, 1998, the Company completed the acquisition of Tarquin. As the
transaction was accounted for on a pooling-of-interests basis, all amounts
included for ACE Global Markets for 1998 were restated to reflect the gross
premiums written for Tarquin.
(2) CAT was acquired on April 1, 1998, and thus gross premiums written for ACE
Tempest Re in fiscal 1998 include gross premiums written for CAT for the
six month period since acquisition.
(3) ACE US Holdings was acquired on January 2, 1998, and thus gross premiums
written for ACE USA in fiscal 1998 only relate to the nine month period
since acquisition. Gross premiums written for fiscal 1999 include premiums
from ACE US Holdings and six months of premium from the domestic operations
of ACE INA acquired on July 2, 1999.
(4) ACE International's gross premiums written for 1999 reflect premiums from
July 2, 1999, the date of acquisition.
(5) As ACE Financial Services was acquired on December 30, 1999, no statement
of operations information for ACE Financial Services is reflected in the
ACE results for the year ended December 31, 1999.
3
Analysis of Gross Premiums Written by Geographic Region: The following table
sets forth an analysis of gross premiums written by geographic region for the
years ended December 31, 2000 and 1999, and for the year ended September 30,
1998:
North Australia & Asia Latin
America Europe New Zealand Pacific America Other Total
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2000................. 60% 18% 2% 9% 4% 7% 100%
1999................. 59% 18% 4% 9% 3% 7% 100%
1998................. 79% 9% 5% 4% -- 3% 100%
ACE Bermuda
Principal Business
ACE Bermuda provides property and casualty insurance and reinsurance
coverage across a broad range of business including: excess liability,
professional lines, financial lines, satellite, excess property and political
risk. The nature of coverage provided by these lines is generally expected to
result in low frequency but high severity of individual losses. The reinsurance
market is an integral part of the risk management strategy of ACE Bermuda and
coverage has been secured on most major lines of business.
ACE Bermuda, the first insurance company in the ACE Group, was formed to
focus on excess liability and directors and officers insurance. As these
insurance markets became more competitive in the early 1990's, ACE Bermuda
diversified its product offering to include financial lines, satellite, excess
property and aviation while reducing its exposure to the excess liability and
director and officers markets.
Since its inception in 1995, the financial lines division has continued to
increase in significance and at December 31, 2000 accounted for almost 50
percent of ACE Bermuda's gross premiums written. Now known as ACE Financial
Solutions International, Ltd. ("ACE FSI"), this group provides a variety of
non-traditional insurance and finance-related solutions that conventional
insurance does not address. These solutions are individually tailored to meet
the needs of the insured and have the following common characteristics: multi-
year contract terms; broad coverage that includes stable capacity and pricing
for the insured; insured participation in the results of their own loss
experience; and aggregate limits.
ACE Bermuda enters into loss portfolio transfer contracts from time to time.
These contracts, which meet the established criteria for reinsurance
accounting, are recorded in the statement of operations when written and
generally result in large one-time written and earned premiums with comparable
incurred losses.
As the ACE Group evolves, the Company continues to evaluate its business
operations to ensure it operates in the most efficient and effective way. As a
result, in August 2000, ACE Bermuda ceased underwriting aviation business in
Bermuda. Aviation renewals are now being written by ACE Global Markets, a
recognized leader in the worldwide aviation insurance market. In addition,
during 2000, ACE Bermuda transferred certain satellite business to ACE USA.
Sovereign Risk Insurance Ltd., ACE Bermuda's joint venture in the political
risk arena, provides insurance to financial institutions and major
corporations, and reinsurance to multilateral development banks and national
export agencies.
Marketing and Underwriting
ACE Bermuda emphasizes quality of underwriting rather than volume of
business to obtain a suitable spread of risk. This enables the company to
operate with a relatively small number of employees and, together with the
reduced costs of operating in favorable regulatory and tax environments,
results in a significantly lower administrative expense ratio relative to other
companies in the industry.
4
Policyholders are generally obtained through non-U.S. insurance brokers who
typically receive a brokerage commission on any business accepted and bound by
the company. All policy applications to ACE Bermuda (both for renewals and new
policies) are subject to underwriting and acceptance by ACE Bermuda in its
Bermuda office. A substantial number of policyholders meet with the company
outside of the United States each year to discuss their insurance coverage. ACE
Bermuda believes that conducting its operations through its offices in Bermuda
has not materially or adversely affected its underwriting and marketing
activities to date.
ACE Bermuda receives business from approximately 43 non-U.S. brokers of
which 2 produced approximately 59 percent of the company's business in 2000.
The following table sets forth the percentage of the company's insurance
business placed through each broker and its affiliates placing more than 10
percent of the company's business.
Years Ended Year Ended
December 31, September 30,
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Name 2000 1999 1998
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Marsh and McLennan Companies, Inc.(1).......... 26% 22% 39%
Aon Corporation................................ 33% 23% 19%
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(1) In 1999, Marsh and McLennan Companies, Inc. acquired Sedgwick. The
percentages shown in the table reflect the business placed by the combined
entities and their affiliates.
Competition
ACE Bermuda operates in a highly competitive worldwide market and competes
with most major U.S. and non-U.S. insurers, which may differ across product
lines. ACE Bermuda's key marketing advantage is its experienced underwriting
staff, its strong capital base, and its ability to market a number of insurance
products to its existing and potential client base. The ability to be flexible
in providing contracts, which extend coverages for periods in excess of one
year, also enhances its ability to compete in worldwide insurance markets.
Claims Administration
Claims arising under policies issued by ACE Bermuda are managed in Bermuda
by ACE Bermuda's claims department. This department maintains a claims database
into which all notices of loss are entered. If the claims department determines
that a loss is of sufficient severity, it makes a further inquiry of the facts
surrounding the loss and, if deemed necessary, retains outside claims counsel
to monitor claims. Based upon its evaluation of the claim, the claims
department may recommend that a case reserve in a specified amount is
established or that all or part of a claim is paid. The claims department
monitors all claims and, where appropriate, will recommend the establishment of
a new case reserve or the increase or decrease of an existing case reserve with
respect to a claim.
With the exception of certain aviation coverages bound before August 1,
2000, ACE Bermuda does not undertake to defend its insureds. It has, in certain
instances, provided advice to insureds with respect to the management of
claims. ACE Bermuda believes that its experience in resolving large claims and
its proactive approach to claims management has contributed to the favorable
resolution of several cases. Because ACE Bermuda does not do business in the
U.S., it must often rely on U.S. counsel to assist it in evaluating liability
and damages confronting its insureds in the U.S. ACE Bermuda believes that the
procedures it follows have not materially or adversely affected its ability to
identify, review or settle claims.
ACE Global Markets
Principal Business
ACE Global Markets primarily encompasses the Company's operation in the
Lloyd's market, including for segment purposes, the Lloyd's operations owned by
ACE Financial Services. ACE Global Markets provides
5
funds at Lloyd's to support underwriting by the ACE managed Lloyd's syndicates.
For the 2000 year of account, the Company's participation in the underwriting
capacity of the ACE managed syndicates was approximately $765 million out of
the total $915 million of capacity. Following the mergers of the ACE managed
syndicates for the 2000 year of account, these syndicates comprised Syndicate
2488, the largest syndicate in Lloyd's, and Syndicate 1171, a life syndicate
acquired as part of the ACE Financial Services acquisition. Syndicate 1171
ceased underwriting as of December 31, 2000.
As the market continued to consolidate in 2000, the Company believed that
the timing was right to expand its business and increased the capacity of
syndicate 2488 by 20 percent to $1 billion for 2001. In addition, for the 2001
year of account ACE will provide approximately 90 percent, or $979 million, of
the capacity of syndicate 2488 compared to 84 percent in 2000.
Syndicate 2488, provides property and casualty insurance and reinsurance as
well as accident & health coverage on a worldwide basis through the Lloyd's
worldwide licenses. The property and casualty business includes: liability,
marine, property, casualty, inward reinsurance, aviation and specialty.
The 2488 syndicate is a lead underwriter on a high proportion of the
business it transacts in the Lloyd's market. A lead underwriter is involved in
setting the terms and conditions of the policies written. ACE Global Markets is
an established lead underwriter in the aviation, marine and specialty product
lines.
All syndicates at Lloyd's are managed by managing agencies that receive fees
and profit commissions in respect of the underwriting and administrative
services they provide to the syndicates. The Company currently owns five
managing agencies. As the Company's participation in the syndicates under
management has grown, the amount of third party fees and profit commissions
received by the Company's managing agencies has decreased substantially.
Marketing and Underwriting
ACE Global Markets differentiates itself in the Lloyd's market by developing
and maintaining close, long term relationships with clients. The ability of ACE
Global Markets to obtain an Aa2 rate from Moody's has also had a positive
impact on the Company's ability to attract new business.
Ordinarily Lloyd's syndicates access business through Lloyd's brokers. For
certain lines of business, however, it is possible to utilize a service company
to access and service business from both Lloyd's and non-Lloyd's brokers.
During 2000, Lloyd's began widening the access to the Lloyd's market to
accredited insurance intermediaries of all types. The Company's syndicate
already accesses business from non-Lloyd's brokers through its service company,
ACE Underwriting Services Limited ("AUS"). For 2001, the Company plans for AUS
to develop similar underwriting initiatives worldwide. In conjunction with this
investment, ACE Global Markets is developing an internet platform to complement
AUS's developing distribution channels.
Competition
Not withstanding the improvement in market conditions seen in 2000, there
remains significant competition in all lines of business written by the
syndicates. Depending on the line of business, competition comes from the
London market, other Lloyd's syndicates and ILU Companies (Institute of London
Underwriters), and major international insurers and reinsurers. On
international risks, competition also comes from the domestic insurers in the
country of origin of the insured.
Claims Administration
With respect to claims arising in Lloyd's syndicates, a claims database is
maintained into which all notices of loss are entered. The Lloyd's Claims
Office ("LCO"), through a daily electronic data interchange message, notifies
the syndicate of claims activity. When a syndicate is a "leading" syndicate on
a Lloyd's policy, it acts
6
through its underwriters and claims adjusters, on its own behalf and in
conjunction with the LCO, in dealing with the broker and/or insured for any
particular claim. This may involve the appointment of attorneys and/or loss
adjusters. The LCO advises all syndicates participating on the risk as to
movements in case reserves.
All information received with respect to case reserves, whether on "lead
business" or on "following business", is monitored and recorded by the
syndicates. The syndicates' claims department can vary the case reserves
carried from those advised by the LCO and can carry reserves for claims not
processed by the LCO. Any such adjustments and entries are specifically
identifiable within the claims system.
ACE Global Reinsurance
Principal Business
The principal business of the ACE Global Reinsurance segment is the
operations of ACE Tempest Re, which primarily includes property catastrophe
reinsurance provided worldwide to insurers of commercial and personal property.
Property catastrophe reinsurance protects a ceding company against an
accumulation of losses covered by the insurance policies it has issued arising
from a common event or "occurrence." ACE Tempest Re underwrites reinsurance
principally on an excess of loss basis. Other property reinsurance written by
ACE Tempest Re on a limited basis for select clients, includes proportional
property and per risk excess of loss treaty reinsurance.
In early 2000, ACE Tempest Re initiated plans to expand its operations to
become a multiline global reinsurer. This expansion is expected to reduce
volatility and enable ACE Tempest Re to diversify its business and offer a
broad range of products to satisfy client demand. An expanded product offering
is considered vital to capturing an increasing share of the future reinsurance
market. In April 2000, ACE Tempest Re U.S.A. Inc. ("ACE Tempest U.S.") was
established in the U.S. ACE Tempest U.S. is wholly owned by ACE INA and acts as
an underwriting agency on behalf of two of the U.S. companies in the ACE Group.
Its initial focus has been on writing property per risk and casualty
reinsurance. In October 2000, ACE Tempest Life Reinsurance Ltd. ("ATLR") was
incorporated in Bermuda. ATLR has a license to write life reinsurance and will
focus on non-traditional solutions for life and annuity reinsurance.
ACE Tempest Re is currently seeking regulatory authorization to underwrite
property and casualty reinsurance through a London branch of ACE Tempest Re.
The London branch plans to focus on expansion into Europe and Asia Pacific.
Marketing and Underwriting
ACE Tempest Re markets its reinsurance products worldwide through
reinsurance brokers. The underwriting teams build relationships with key
brokers and clients by explaining their approach and demonstrating
responsiveness to customer needs.
ACE Tempest Re will leverage the strengths of its client relationships,
underwriting expertise, rational pricing and capital base in developing its new
lines of business which it expects to add in accordance with its strategy to
offer risk protection across all lines of reinsurance.
ACE Tempest Re receives business from approximately 26 brokers. The
following table sets forth the percentage of ACE Tempest Re's business written
through each broker and its affiliates that placed more than 10 percent of ACE
Tempest Re's business:
Year Ended Year Ended Year Ended
December 31, December 31, September 30,
2000 1999 1998
------------ ------------ -------------
Marsh and McLennan Companies,
Inc.(1).......................... 38% 37% 47%
E.W. Blanch....................... 19% 15% 16%
Aon Corporation................... 8% 11% 8%
- --------
(1) In 1999, Marsh and McLennan Companies Inc., acquired Sedgwick. The
percentages shown in the table reflect the business placed by the combined
entities and their affiliates.
7
Rates, limits, retention and other reinsurance terms and conditions are
generally established in a worldwide competitive market that evaluates exposure
and balances demand for property catastrophe coverage against the available
supply. ACE Tempest Re believes it is perceived by the market as being a "lead"
reinsurer and is typically involved in the negotiation and quotation of the
terms and conditions of the majority of the contracts in which it participates.
Because ACE Tempest Re underwrites property catastrophe reinsurance and has
large aggregate exposures to natural and man-made disasters, ACE Tempest Re's
claims experience generally will involve infrequent events of considerable
severity. ACE Tempest Re seeks to diversify its property catastrophe
reinsurance portfolio to moderate the impact of this severity. The principal
means of diversification are by geographic coverage and by varying attachment
points and imposing coverage limits per program. ACE Tempest Re also
establishes zonal accumulation limits to avoid concentrations of risk within
particular geographic areas.
ACE Tempest Re applies an underwriting process for property catastrophe
risks based on models that use exposure data submitted by prospective
reinsureds in accordance with requirements set by ACE Tempest Re's
underwriters. The client data is then analyzed using a selection from several
available catastrophe analysis tools, including externally developed event
based models licensed from leading vendors as well as proprietary models
developed in house.
The output from the catastrophe analysis tools is also used for portfolio
risk management, enabling ACE Tempest Re to extensively simulate possible
combinations of events affecting the portfolio. This analysis also supports the
decision making with regard to purchasing retrocessional coverages.
Competition
ACE Tempest Re competes worldwide with major U.S. and non-U.S. reinsurers as
well as reinsurance departments of numerous multi-line insurance organizations.
The Company also competes with other Bermuda based property catastrophe
reinsurers. ACE Global Reinsurance competes effectively because of the strong
capital position of the ACE Group; the quality of service provided to
customers; the leading role it plays in setting the terms, pricing and
conditions in negotiating contracts; and its customized approach to risk
selection.
Claims Administration
Claims arising under contracts written by ACE Tempest Re are maintained in a
claims database into which all notices of loss are entered. Those claims are
then reviewed and case reserves are established for ACE Tempest Re's portion of
the loss. Case reserves are adjusted based on receipt of further notifications
from brokers.
Claims handling activities for the new lines of business will be managed by
the division where the contract is written. Loss notices are received directly
from brokers.
ACE USA
Principal Business
The principal business of ACE USA is the combined business of ACE US
Holdings, which was acquired by the Company January 2, 1998, and the domestic
operations of ACE INA acquired on July 2, 1999. The operations of ACE USA
include ongoing domestic operations as well as the run-off operations of
Brandywine Holdings, Inc. ("Brandywine"), which does not write new policies.
The ongoing operations provide specialty property and casualty products and
services and are comprised of the following operating divisions: aerospace,
8
diversified products, financial products, marine, professional risk services,
property, special risk, U.S. international, warranty, westchester specialty and
"other" operations. The "other" operations include all remaining insurance
operations of ACE US Holdings and selected insurance related operations
including the run-off of Commercial Insurance Services ("CIS"), residual market
worker's compensation business, pools and syndicates not attributable to a
single business unit and the runoff of open market facilities business.
Insurance related operations include those of ESIS Inc. ("ESIS"), the Company's
in-house third party claims administrator and Recovery Services International
("RSI"), which sells salvage, subrogation, and premium collection services.
Following the acquisition of the domestic operations of ACE USA on July 2,
1999, the Company made substantial structural and operational changes to
enhance profitability and operating controls in the segment. These changes
included restructuring the operating divisions from three large groups to the
business divisions discussed above. These operational changes were made to
enhance the Company's ability to better focus on profitable underwriting and
market its products. ACE USA also closed 63 offices throughout the US,
outsourced the IT function, and reduced staff by approximately 2,000 people.
These cost reduction efforts had a positive impact on both the expense ratio
and the loss ratio, due to a reduction in unallocated loss adjustment expenses.
As part of the restructuring of the operating divisions, ACE USA critically
evaluated all lines of business and has exited contracts and lines of business
that did not have a long-term strategic fit. During the year ended December 31,
2000, this amounted to a reduction of gross premiums written of $158 million.
This focus on profitable business together with the cost reduction efforts
enabled ACE USA to operate at a combined ratio under 100 percent.
In addition to the exited business discussed above, ACE USA sold the renewal
rights for all of its CIS business in 1999 and planned to sell the assets and
liabilities pertaining to the historical book of business as well as the in-
force book of business which it still owned. As of December 31, 2000, the
remaining business of CIS continues to run-off and has not been sold.
The Brandywine run-off operation, was created in 1995 by the restructuring
of ACE INA's domestic operations into two separate operations, ongoing and run-
off. Brandywine contains substantially all of ACE INA's asbestos and
environmental exposures as well as various run-off insurance and reinsurance
businesses. The run-off operations do not actively sell insurance products, but
are responsible for the management of run-off policies and related claims
including those for asbestos-related and environmental pollution exposures.
Certain competitors and policyholders of CIGNA have challenged the regulatory
approvals resulting in the creation of Brandywine. In July 1999, the
Pennsylvania Supreme Court upheld the action of the Pennsylvania Insurance
Commissioner in granting such approvals. In May 2000, the Superior Court of the
State of California found that there was no legal basis for a lawsuit with
regard to the aforementioned restructuring. The California trial court decision
has been appealed. That appeal has been briefed and is awaiting a hearing.
Marketing and Underwriting
ACE USA plans to seek out and capitalize on emerging market opportunities
and primarily distributes its insurance products through a limited group of
brokers and wholesale brokers with whom long-term relationships have been
forged. ACE USA's management believes the match between its expertise and that
of its brokers is one of the key reasons brokers place business with it.
Certain products are also distributed through alternative distribution channels
such as general agents, independent agents and direct marketing operations.
Additionally, e-commerce distribution opportunities are in the process of
development. ACE USA seeks out and capitalizes on emerging market opportunities.
9
The following table sets forth the percentage of ACE USA's business written
through brokers placing more than 10 percent of ACE USA's business:
Year ended Year ended
December 31, December 31,
Name 2000 1999
---- ------------ ------------
Rain & Hail Insurance Services(1).................. 11% 14%
- --------
(1) Rain & Hail Insurance Services is a managing agency that specializes in
crop insurance, most of which is federally reinsured.
Operating in a market in which capacity and price adequacy for its products
can change dramatically, ACE USA's underwriting strategy is to employ
consistent, disciplined pricing and risk selection in order to maintain an
attractive book of business. Management's priority is to ensure that criteria
for risk selection are closely adhered to by its underwriting professionals
through maintaining high levels of experience and expertise in its underwriting
staff. In addition, ACE USA has established a business review structure that
ensures control of risk quality and conservative use of policy limits, terms
and conditions.
ACE USA has the ability to write business on an admitted basis using forms
and rates as filed with state insurance regulators and on a non-admitted, or
surplus lines basis using flexible forms and rates not filed with state
insurance regulators. Having access to non-admitted carriers provides the
flexibility to write non-standard coverage.
An integral part of the ACE USA operating strategy is to maximize the
efficiency and effectiveness of its operations while reducing operating costs.
Critical to the success of this strategy, ACE USA is in the process of
investing in technology which is expected to replace various existing
information systems in order to allow greater access to information and
increased effectiveness in underwriting and processing operations.
Competition
ACE USA operates in a highly competitive industry and faces competition from
both domestic and foreign insurers. The markets in which ACE USA competes are
subject to significant cycles of fluctuating capacity and wide disparities in
price adequacy. The domestic operations pursue a specialist strategy and focus
on market opportunities where they can compete effectively based on service
levels and product design while achieving an adequate level of profitability.
ACE USA offers experienced claims handling, loss control and risk management
staffs with proven expertise in specialty fields, including large-risk property
and casualty, recreational and ocean marine, aviation, and worker's
compensation. A competitive strength of all the domestic units, especially
special risk facilities, is the ability to deliver global products and
coverages to customers in concert with the ACE International property and
casualty operations.
Claims Administration
ACE USA's claims organization supports both the national accounts (Special
Risk) and the specialty insurance businesses with a national network of claims
and risk management services. The Brandywine claim professionals have the
unique expertise and experience to manage specialized coverage and coordination
issues that arise in asbestos, environmental and other latent exposure claims.
A team of risk control professionals supports each business line to
effectively manage loss costs for the risk exposures underwritten by the
businesses of ACE USA. Specialized loss cost containment programs have been
designed for marine risk, aerospace risk, global property risk, warranty
programs, excess risk, inland marine risk, diversified products and
professional risk services.
The Special Risk Business is supported by ESIS, ACE USA's in-house third
party claims administrator. ESIS markets loss control, risk information and
claims services to large corporate customers on a fee-for-service basis.
10
ACE International
Principal Business
ACE International is a global franchise with a presence in nearly 50
countries. The franchise was created through the merger of the Insurance
Company of North America ("INA"), which started its international franchise
over 100 years ago and the AFIA, which also had developed a strong
international presence.
ACE International's operations provide insurance coverage on a worldwide
basis excluding the United States. The principal business operations are
property and casualty and accident and health. Operating management is carried
out through four regional teams: Europe, Far East, Asia Pacific and Latin
America.
The international property and casualty operations are conducted through a
specialist insurance organization offering capacity and technical expertise in
the underwriting of large and unique risks for targeted commercial customer
segments, as well as individual coverages in selected markets. Its property
insurance products include traditional commercial fire coverage as well as
energy industry-related and other technical coverages. Principal casualty
products are commercial general liability and liability coverage for
multinational organizations. Marine cargo and hull coverages are written in the
London market as well as in marine markets throughout the world. The operations
also design and implement risk-financing alternatives for customers whose
approach to risk management includes some form of self-insurance.
The international accident and health insurance operations provide products
that are designed to meet the insurance needs of individuals and groups outside
of U.S. insurance markets. These products include accidental death, medical,
hospital indemnity and income protection coverages. For the year ended December
31, 2000, gross premiums written from accident & health accounted for 28
percent of ACE International's premiums.
In conducting its non-U.S. business, ACE International reduces the risks
relating to currency fluctuations by maintaining investments in those foreign
currencies in which the division transacts business, with characteristics of
those investments similar to the related liabilities in those currencies. The
net asset or liability exposure to the various foreign currencies is regularly
reviewed.
Marketing and Underwriting
ACE International maintains a sales or operational presence in major
insurance markets around the world. Its property and casualty business is
generally written, on both a direct and assumed basis, through major
international and local brokers. Accident and health and other personal lines
products are distributed through agents, financial institutions and various
direct marketing channels including e-commerce.
ACE International's operations are diversified by line of business and
geographic spread of risk. A global approach to risk management allows each
local operation to underwrite and accept large insurance accounts. Centrally
controlled internal reinsurance mechanisms facilitate appropriate risk transfer
and efficient, cost-effective use of external reinsurance markets.
Competition
ACE International's primary competitors include U.S.-based companies with
global operations, as well as other, non-U.S. global carriers and indigenous
companies in regional and local markets. For the accident and health lines of
business, locally based competitors include financial institutions and bank-
owned insurance subsidiaries.
The principal competitive factors that affect the international operations
are underwriting and pricing, relative operating efficiency, product
differentiation, producer relations and the quality of claims and policyholder
services. A competitive strength of the international operations is its global
network and breadth
11
of insurance programs, which assist individuals and business organizations to
meet their risk management objectives.
Claims Administration
ACE International's claims service operations are decentralized, with
management of most aspects of claim administration occurring at an individual
country level. The claims organization structure in each country is driven by
the composition of the business portfolio. The outsourcing of claims
settlement, adjusting services, or other claims functions may occur when
appropriate.
ACE Financial Services
Principal Business
The companies in the ACE Financial Services segment offer value-added
insurance, reinsurance and financial derivative products to the insurance and
capital markets, which provide protection from credit or financial risks. ACE
Financial Services writes municipal and non-municipal financial guaranty
reinsurance and credit default swaps, mortgage guaranty reinsurance, trade
credit reinsurance, title reinsurance, life & annuity reinsurance and residual
value reinsurance.
The ACE Financial Services segment primarily carries out its business
through the following legal vehicles: ACE Guaranty Re Inc. ("AGR"), ACE Capital
Re International Ltd. ("ACRI"), ACE Capital Mortgage Reinsurance Company
("ACMR"), ACE Capital Re Overseas Ltd. ("ACRO") and ACE Capital Title
Reinsurance Company ("ACTR").
ACE Financial Services' financial guaranty business is conducted primarily
through AGR. AGR serves the U.S. domestic and international financial guaranty
reinsurance markets. It is a leading reinsurer (by market share) of financial
guaranties of investment grade debt obligations--principally of municipal and
non-municipal obligors. ACRI and ACRO are primarily focused on providing highly
structured solutions to problems of financial and risk management through
reinsurance and other forms of credit enhancement. ACMR and ACTR are New York
regulated monoline reinsurance companies providing mortgage guaranty
reinsurance and title reinsurance respectively.
Financial guaranty reinsurance is a type of credit enhancement, similar to a
surety, which is regulated under the insurance laws of various jurisdictions.
Financial guaranty insurance provides an unconditional and irrevocable guaranty
that indemnifies the insured against nonpayment of principal and interest on an
insured debt obligation when due. Additionally, ACE Financial Services
financial guaranty business provides municipal and non-municipal credit risk
protection on a facultative basis to a wide variety of counterparties through
credit default swap transactions. Although structured as financial derivatives,
credit default swaps are functionally equivalent to financial guaranty
reinsurance.
Mortgage guaranty insurance is a specialized class of credit insurance,
providing protection to mortgage lending institutions against the default of
borrowers on mortgage loans. Title insurance essentially provides the acquirer
or the mortgagee of real property with two forms of coverage. The first assures
that the search and examination of the real estate records, upon which the
acquirer or mortgagee is relying for good and clean title, was properly
performed. The second form of coverage assures that all previously existing
mortgages and liens will be paid off from the proceeds of the sale or
refinancing of the property. Trade credit insurance protects sellers of goods
and services from the risk of non-payment of trade receivables and is a large,
well-established specialty insurance product, particularly in Western Europe.
Policyholders are generally covered for short-term exposures (generally less
than 180 days and averaging 60-90 days) to insolvency or payment defaults by
domestic and/or foreign buyers. Some export credit policies also cover
political events, which can disrupt either the flow of goods and services or
payment for goods and services. Life & annuity reinsurance provides long-
duration funded reinsurance for portfolios of lives where the reinsured seeks
capital or balance sheet relief by
12
the transfer of the mortality or morbidity risks in the portfolios. Residual
value reinsurance is generally provided to the captives of motor vehicle
manufacturers or lessors, whereby the coverage effectively guarantees the
residual value of portfolios of leased vehicles at the termination of the lease
term.
Marketing and Underwriting
ACE Financial Services has established and maintains relationships with the
major U.S. primary financial guaranty insurers, mortgage guaranty insurers and
title insurers, major European trade credit insurers and primary mortgage
guaranty insurers in the U.K. and Australia. Large life and disability insurers
form the main customer base for the life & annuity reinsurance business, while
major U.S. and European investment banks act as counterparties on credit
default swaps.
A portion of ACE Financial Services' reinsurance business is developed
through relationships with brokers and reinsurance intermediaries. The title
reinsurance business has developed substantially all of its business
opportunities through direct contacts with primary title insurers, while the
financial guaranty business has been developed through direct contacts with
U.S. primary companies and major investment banks in the U.S. and Europe.
For the majority of ACE Financial Services' business the underwriting
process is premised on reinsuring investment grade credit risks and risk remote
or finite financial risks. The underwriting process is based on multiple levels
of credit review, actuarial analysis, stress-based modeling and legal review.
Underwriters minimize correlation and aggregation through diversification of
exposures by geography, industry sector, credit enhancement/attachment point
and rating category of underlying credits.
Competition
ACE Financial Services faces direct and indirect competition from
equivalently rated financial institutions on all lines of business.
Differentiating factors include pricing, customer service, market perception
and historical performance.
In its financial guaranty business, ACE Financial Services faces competition
indirectly from other highly rated financial institutions that provide capital
substitutes to the primary financial guaranty insurance companies. Competition
is also a function of the ease with which primary insurers can raise capital in
the private or public equity markets. Increased primary capital increases the
ability of insurers to retain risk and the need for reinsurance in general is
diminished.
For mortgage reinsurance business, competition comes from some non-U.S.
mortgage reinsurers and, in a minor way, from U.S. multiline insurers. In the
title business, the large title insurers have traditionally provided
reinsurance capacity.
In its trade credit and life & annuity businesses, the Company faces a high
degree of competition from traditional participants in these markets, including
large multiline insurers and reinsurers.
Claims Administration
ACE Financial Services operates an internal claims management,
administration and payment function. Use of external actuarial and legal
consultants is made where this is deemed prudent by management.
Unpaid Losses And Loss Expenses
The Company establishes reserves for unpaid losses and loss expenses, which
are estimates of future payments of reported and unreported claims for losses
and related expenses, with respect to insured events that have occurred. The
process of establishing reserves for property and casualty claims continues to
be a complex and imprecise process, requiring the use of informed estimates and
judgments. The Company's estimates and judgments may be revised as additional
experience and other data become available and are reviewed, as new or improved
methodologies are developed or as current laws change. Any such revisions could
result in future changes in estimates of losses or reinsurance recoverables,
and would be reflected in the Company's results of operations in the period in
which the estimates are changed.
13
The Company has considered asbestos and environmental claims and claims
expenses in establishing the liability for unpaid losses and loss expenses. The
Company has developed reserving methods which incorporate new sources of data
with historical experience to estimate the ultimate losses arising from
asbestos and environmental exposures. The reserves for asbestos and
environmental claims and claims expenses represent management's best estimate
of future loss and loss expense payments and recoveries which are expected to
develop over the next several decades. The Company continuously monitors
evolving case law and its effect on environmental and latent injury claims.
While reserving for these claims is inherently uncertain, the Company believes
that the reserves carried for these claims are adequate based on known facts
and current law.
The Company continually evaluates its estimates of reserves in light of
developing information and in light of discussions and negotiations with its
insureds. While the Company is unable at this time to determine whether
additional reserves, (which could have a material adverse effect upon the
financial condition, results of operations and cash flows of the Company) may
be necessary in the future, the Company believes that its reserve for unpaid
losses and loss expenses are adequate as of December 31, 2000.
The Company engages independent actuarial firms to review the methods and
assumptions used by the Company in estimating the unpaid losses and loss
expenses. As stated in its actuarial review, the firm believes that the methods
and assumptions used by the Company are reasonable and appropriate for use in
setting loss reserves at December 31, 2000.
Losses and loss expenses are charged to income as incurred. The reserve for
unpaid losses and loss expenses represents the estimated ultimate losses and
loss expenses less paid losses and loss expenses and is comprised of case
reserves, loss expense reserves and IBNR loss reserves. During the loss
settlement period, which can be many years in duration, additional facts
regarding individual claims and trends often will become known. As these become
apparent, case reserves may be adjusted by allocation from the IBNR loss
reserve without any change in the overall reserve. In addition, application of
statistical and actuarial methods may require the adjustment of the overall
reserves upward or downward from time to time. The final liability,
nonetheless, may be significantly greater than or less than the prior
estimates.
The "Analysis of Losses and Loss Expenses Development" shown below presents
the subsequent development of the estimated year-end liability for unpaid
losses and loss expenses at the end of each of the years in the nine year
period ended September 30, 1998 as well as for the fifteen month period ended
December 31, 1999 and the year ended December 31, 2000. Prior to December 31,
1999, the unpaid losses and loss expenses are in respect of annual periods
ending on September 30 of each year. The top line of the table shows the
estimated liability for unpaid losses and loss expenses recorded at the balance
sheet date for each of the indicated periods. This liability represents the
estimated amount of losses and loss expenses for claims arising from all prior
years' policies and agreements that were unpaid at the balance sheet date,
including IBNR loss reserves. The upper (paid) portion of the table presents
the amounts paid as of subsequent periods on those claims for which reserves
were carried as of each balance sheet date. The lower portion of the table
shows the re-estimated amount of the previously recorded liability as of the
end of each succeeding period. Several aspects of the Company's operations,
including the low frequency and high severity of losses in the high excess
layers in which the Company provides insurance, complicate the actuarial
reserving techniques utilized by the Company. Accordingly, the Company expects
that ultimate losses and loss expenses attributable to any single underwriting
year will be either more or less than the incremental changes in the lower
portion of the following table.
Management believes, however, that the losses and loss expenses which have
been recorded through December 31, 2000, are adequate to cover the ultimate
cost of losses and loss expenses incurred through December 31, 2000, under the
terms of the Company's policies and agreements. Since such provisions are
necessarily based on estimates, the ultimate losses and loss expenses may be
significantly greater or less than such amounts.
14
Analysis of Losses and Loss Expenses Development
Years ended September 30th
--------------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998
--------- ---------- ----------- ---------- ---------- ---------- ---------- ---------- ----------
(in thousands of U.S. dollars)
Unpaid........... $ 319,230 $ 470,832 $ 813,849 $ 766,402 $1,176,215 $1,489,293 $1,892,302 $2,006,873 $2,678,341
Paid (Cumulative)
As Of:
1 year later.... 181,525 149,493 340,836 126,566 66,888 80,080 358,713 337,422 1,017,822
2 years later... 207,587 490,116 465,074 183,439 121,628 414,419 663,087 925,361 1,480,173
3 years later... 531,502 590,847 517,366 228,638 451,746 696,470 1,247,652 1,066,253
4 years later... 601,811 611,133 551,887 558,625 725,799 1,259,344 1,372,345
5 years later... 622,097 627,691 881,198 837,515 1,285,599 1,379,586
6 years later... 631,371 764,607 1,150,628 1,398,270 1,368,664
7 years later... 641,060 843,283 1,672,772 1,481,328
8 years later... 664,896 988,087 1,755,791
9 years later... 727,175 1,067,055
10 years later.. 737,689
Fifteen
Month
period Year ended
ended Dec. December 31
31 1999 2000
---------- -----------
Unpaid........... $8,908,817 $9,330,950
Paid (Cumulative)
As Of:
1 year later.... 2,631,171
2 years later...
3 years later...
4 years later...
5 years later...
6 years later...
7 years later...
8 years later...
9 years later...
10 years later..
Years ended September 30th
--------------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998
--------- ---------- ----------- ---------- ---------- ---------- ---------- ---------- ----------
(in thousands of U.S. dollars)
Liability Re-
estimated
As Of:
End of year..... $ 319,230 $ 470,832 $ 813,849 $ 766,402 $1,176,215 $1,489,293 $1,892,302 $2,006,873 $2,678,341
1 year later.... 475,647 706,960 813,849 966,402 1,177,292 1,489,293 1,892,302 1,989,744 2,753,017
2 years later... 665,533 706,960 1,085,012 1,067,987 1,227,538 1,489,293 1,881,403 1,914,936 2,748,013
3 years later... 665,533 874,368 1,234,462 1,211,424 1,386,571 1,480,426 1,824,449 1,878,656
4 years later... 663,480 888,387 1,412,495 1,429,990 1,401,329 1,495,443 1,852,466
5 years later... 680,119 940,513 1,666,770 1,442,523 1,472,394 1,588,975
6 years later... 711,671 1,113,662 1,703,103 1,580,022 1,530,195
7 years later... 768,935 1,099,102 1,852,125 1,642,465
8 years later... 771,018 1,142,511 1,916,405
9 years later... 808,239 1,207,260
10 years later.. 870,040
Cumulative
Redundancy
/(deficiency)... (550,810) (736,428) (1,102,556) (876,063) (353,980) (99,682) 39,836 128,217 (69,672)
Fifteen
Month
period Year ended
ended Dec. December 31
31 1999 2000
---------- -----------
Liability Re-
estimated
As Of:
End of year..... 8,908,817 9,330,950
1 year later.... 8,848,453
2 years later...
3 years later...
4 years later...
5 years later...
6 years later...
7 years later...
8 years later...
9 years later...
10 years later..
Cumulative
Redundancy
/(deficiency)... 60,364 --
Net unpaid loss and loss expenses.................................. $ 9,330,950
Reinsurance recoverable on unpaid losses........................... $ 8,057,444
-----------
Gross unpaid loss and loss expenses................................ $17,388,394
===========
Notes to Analysis of Losses and Loss Expenses
- ------
(1) On July 2, 1999, the Company changed its fiscal year-end from September 30
to December 31. As a result, the information provided above for the 1999
year is actually for the 15 month period from October 1, 1998, through
December 31, 1999. All prior periods represent years ending on September
30.
(2) The Company does not consider it appropriate to extrapolate future
deficiencies or redundancies based upon the above tables, as conditions and
trends that have affected development of the liability in the past may not
necessarily occur in the future.
(3) In 1994, the Company recorded an additional reserve of $200 million,
related primarily to developments in breast implant litigation, in respect
of years prior to 1994.
(4) In 1992, the Company began applying actuarial and statistical methods to
estimate ultimate expected losses and loss expenses for all of the
Company's business since inception. At September 30, 1994, the Company
changed its method of allocating IBNR to accident and balance sheet years.
This allocation assigns IBNR to years based upon various risk factors
including immaturity of year, amount of premium earned in that year, and
development of known claims. As the Company's loss experience is
characterized as low frequency, and high severity, IBNR is considered a
bulk reserve, and is therefore available for loss development from
whichever year it may arise. Prior to 1994, the allocation of IBNR to
accident and balance sheet years was based upon a loss distribution
indicated by the expected loss method employed by the Company. Losses paid
for the year ending September 30, 1998, include an amount of $26 million,
which is expected to be recovered from an insured.
(5) On November 1, 1993, the Company acquired CODA, on July 1, 1996, the
Company acquired ACE Tempest Re and on July 9, 1998, the Company acquired
Tarquin. The table has been restated to include CODA, ACE Tempest Re and
Tarquin's loss experience as if each of these companies had been wholly
owned subsidiaries of the Company from their inception. On January 2, 1998,
the Company acquired ACE US Holdings, on April 1, 1998, the Company
acquired CAT Limited and on July 2, 1999, the Company acquired ACE INA. The
unpaid loss information for ACE US Holdings, CAT Limited and ACE INA has
been included in the table commencing in the year of acquisition. As a
result, 1999 includes net reserves of $6.8 billion related to ACE INA at
the date of acquisition and subsequent development thereon.
(6) The "cumulative redundancy/deficiency" shown in the table represents the
aggregate change in the reserve estimates over all subsequent years. The
amounts noted are cumulative in nature; that is, an increase in loss
estimate for prior year losses generates a deficiency in each intermediate
year. For instance, a deficiency recognized in 1994 relating to losses
incurred during the year ending September 30, 1992, would be included in
the cumulative deficiency amount for each year from September 30, 1992, to
the year the loss was recognized (1994), yet the deficiency would be
reflected in operating results only in 1994. An analysis of the changes in
aggregate reserves for losses and loss expenses under GAAP is presented
below. Since reserves are necessarily based upon estimates, the ultimate
net costs may vary from the original estimates. As adjustments to these
estimates become necessary, they are reflected in current operations.
15
Reconciliation of Unpaid Losses and Loss Expenses
Three Months
Year Ended Year Ended Ended Year Ended
December December December 31, September 30,
31, 2000 31, 1999 1998 1998
----------- ----------- ------------ -------------
(in thousands of U.S. dollars)
Gross unpaid losses and
loss expenses at
beginning of period..... $16,460,247 $ 3,678,269 $3,737,869 $2,111,670
Reinsurance recoverable
on unpaid losses........ (7,551,430) (1,100,464) (1,059,528) (104,797)
----------- ----------- ---------- ----------
Net unpaid losses and
loss expenses at
beginning of period..... 8,908,817 2,577,805 2,678,341 2,006,873
Unpaid losses and loss
expenses in respect of
formerly discontinued
operations.............. 1,269,914 -- -- --
Unpaid losses and loss
expenses assumed in
respect of reinsurance
business acquired....... 169,537 183,774 -- 6,403
Unpaid losses and loss
expenses assumed in
respect of acquired
companies (net of
reinsurance recoverable
of $6,345,679 in 1999
and $761,618 in 1998)... -- 6,940,593 -- 731,949
----------- ----------- ---------- ----------
Total................ 10,348,268 9,702,172 2,678,341 2,745,225
=========== =========== ========== ==========
Net losses and loss
expenses incurred in
respect of losses
occurring in:
Current period......... 2,996,429 1,601,278 126,139 534,021
Prior periods.......... (60,364) 38,265 (14,970) (17,129)
----------- ----------- ---------- ----------
Total................ 2,936,065 1,639,543 111,169 516,892
=========== =========== ========== ==========
Net losses and loss
expenses paid in respect
of losses occurring in:
Current period......... 1,205,110 916,848 24,977 243,753
Prior periods.......... 2,631,171 1,509,638 191,473 337,422
----------- ----------- ---------- ----------
Total................ 3,836,281 2,426,486 216,450 581,175
=========== =========== ========== ==========
Foreign currency
revaluation............. (117,102) (6,412) 4,745 (2,601)
=========== =========== ========== ==========
Net unpaid losses and
loss expenses at end of
period.................. 9,330,950 8,908,817 2,577,805 2,678,341
Reinsurance recoverable
on unpaid losses........ 8,057,444 7,551,430 1,100,464 1,059,528
----------- ----------- ---------- ----------
Gross unpaid losses and
loss expenses at end of
period.................. $17,388,394 $16,460,247 $3,678,269 $3,737,869
=========== =========== ========== ==========
Losses and loss expenses for 1999 include incurred losses for ACE INA from
July 2, 1999, the date of acquisition. With respect to the analysis of incurred
and paid losses for ACE INA for the 1999 period, all losses incurred and paid,
on losses occurring in the period January 1, 1999, through December 31, 1999,
have been included as current year activity in 1999.
Incurred losses for the year ended December 31, 2000, were impacted by
favorable development of reserves from prior periods primarily from ACE Tempest
Re, ACE USA and ACE Bermuda partially offset by unfavorable development in ACE
Financial Services.
16
Investments
The Company's principal investment objective is to ensure that funds will be
available to meet its primary insurance and reinsurance obligations. Within
this broad liquidity constraint, the investment portfolio's structure will seek
to maximize return subject to specifically approved guidelines of overall asset
classes, credit quality, liquidity, and volatility of expected returns. As
such, the Company's investment portfolio is invested primarily in fixed income
securities of the highest credit quality.
In June of 2000, the Company formed ACE Asset Management Inc., an operating
group replacing the more traditional role of Chief Investment Officer. The
formation of this group underscores the importance the Company places on the
growth and complexity of ACE's international investment activity. ACE Asset
Management operates principally to guide and direct the investment process of
the ACE Group of Companies. In this regard, the Asset Management Group:
. Conducts formal asset allocation modeling for each of the ACE
subsidiaries, providing formal recommendations for the portfolio's
structure
. Establishes recommended investment guidelines that are appropriate to the
prescribed asset allocation targets
. Provides the analysis, evaluation, and selection of outside investment
advisors to the ACE Group
. Establishes and develops investment related analytics to enhance
portfolio engineering and risk control
. Monitors and aggregates the correlated risk of the overall investment
portfolio
. Provides governance over the investment process for each of the ACE
operating companies to ensure consistency of approach and adherence to
investment guidelines
For the investment portfolio, the Company determines allowable targeted
asset allocation and ranges for each of the operating segments. These asset
allocation targets are derived from sophisticated asset and liability modeling
that measures correlated histories of returns and volatilities of returns.
Allowable investment classes are further refined through analysis of the
Company's operating environment, including expected volatility of cash flows,
overall capital position, regulatory and rating agency considerations.
The Finance Committee of the Board of Directors reviews the Company's
investment policy to ensure that it is consistent with the Company's overall
goals, strategies and objectives. Overall investment guidelines are approved by
the Finance Committee to ensure appropriate levels of portfolio liquidity,
credit quality, diversification, and volatility are maintained. In addition,
the Finance Committee systematically reviews the portfolio's exposures to
capture any potential violations of investment guidelines.
Within the guidelines and asset allocation parameters established by the
Company, individual investment committees of the operating segments determine
tactical asset allocation. Additionally, these committees review all investment
related activity that effects their operating company, including the selection
of outside investment advisors, proposed asset allocations changes, and the
systematic review of investment guidelines.
For additional information regarding the investment portfolio, including
breakdowns of the sector and maturity distributions, see Note 4 of the
Consolidated Financial Statements included in the 2000 Annual Report to
Shareholders.
Regulation
ACE Limited's insurance and reinsurance subsidiaries are subject to
regulation and supervision by the local authority in the countries or states in
which they do business. The extent of such regulation most commonly has its
source in statutes which delegate regulatory, supervisory and administrative
power to a department of insurance.
17
Bermuda Operations
In Bermuda, the Company's insurance subsidiaries are regulated by the
Insurance Act 1978 (as amended by the Insurance Amendment Act 1995) and related
regulations (the "Act"). The Act imposes on Bermuda insurance companies
solvency and liquidity standards; auditing and reporting requirements; and
grants the Minister of Finance powers to supervise, investigate and intervene
in the affairs of insurance companies. Significant requirements include the
appointment of an independent auditor and the appointment of a loss reserve
specialist.
United Kingdom and Lloyd's Regulation
The Company, certain of its UK subsidiaries and some staff employed within
the Lloyd's operations are currently subject to the regulatory jurisdiction of
the Council of Lloyd's (the "Council"). This jurisdiction arises by virtue of
the Company being a controller of each of the Lloyd's managing agencies and the
Corporate Members in which it has an interest. Certain other subsidiaries have
also been approved as controllers, and are similarly subject to Lloyd's
jurisdiction.
Under English law, there are restrictions on the interests Lloyd's brokers
or parties connected to Lloyd's brokers may have in Lloyd's managing agents or
certain of their related entities. In July 2000, responsibility for the
regulatory oversight of Lloyd's brokers passed to the General Insurance
Standards Council ("GISC"). Lloyd's has also introduced an accreditation scheme
with effect from 1 January 2001, for brokers which effectively opens up the
Lloyd's broker franchise. Lloyd's will continue to maintain a register of
Lloyd's brokers and the restrictions outlined above will pertain for the
foreseeable future. However, relaxation of the requirement to use Lloyd's
brokers to place substantially all classes of business is being considered. It
is likely that from 2001 the current requirement in relation to outwards
reinsurance will be relaxed.
Under legislation enacted during 2000, the Financial Services Authority
("FSA") will become the single UK statutory regulator to supervise securities,
banking and insurance business, including Lloyd's. The FSA will have wide
powers to make rules, and it is envisaged these will replace the existing
statutory and self regulatory arrangements relevant to these areas. Lloyd's
will retain certain self regulatory responsibilities but the exact division of
such responsibilities as between Lloyd's and the FSA is still in the process of
being finalised. It is envisaged that the effective date for the transfer of
general regulatory responsibility to the FSA will be in the fall of 2001. The
Company and its subsidiaries will seek any necessary authorizations and
permissions in relation to its Lloyd's operations as may be required under any
new regulatory framework.
Regulation of Lloyd's Entities in the United States
Direct business can be written on either a licensed or a non-admitted (which
includes surplus lines) basis. Licensed insurers are subject to regulation of
both solvency margin and business practices such as premium rate and policy
form control. Non-admitted insurers are not subject to rate and form control in
most states, but regulators manage the entry to the surplus lines market by
imposing minimum solvency and trust requirements for insurers wishing to be
deemed "eligible" surplus lines insurers.
Insurer licensing requirements do not apply to reinsurers and as a result
both licensed and non-admitted reinsurers may write reinsurance in the U.S.
The trading status of underwriters at Lloyd's in the U.S. is supported by a
unique trust fund structure. The trust funds were reviewed and restructured in
August 1995 in consultation with the New York Insurance Department, which acts
as the domiciliary commissioner for Lloyd's U.S. trust funds held in the state
of New York.
Prior to August 1995, all U.S. dollar premiums were deposited and held in
the Lloyd's American Trust Fund ("LATF"), regardless of the actual situs of the
risk. The LATF continues to support risks for U.S. business incepting prior to
August 1995, but the trust fund and accounting arrangements have changed for
U.S. dollar business incepting after August 1, 1995. These include the creation
of a Lloyd's Dollar Trust Fund in the
18
UK and a series of deposit trust funds in the U.S. There are additional trust
fund arrangements in certain U.S. states. Lloyd's and the US regulators
continue to review the basis of Lloyd's syndicate US trading arrangements.
ACE International
The extent of insurance regulation varies significantly among the countries
in which ACE International conducts its operations. While all such countries
impose requirements for licensing, solvency, auditing and financial reporting,
such requirements in these and other areas can differ substantially. For
example:
. In some jurisdictions insurers are required to prepare and file quarterly
financial reports, and in others only annual reports;
. Some jurisdictions require broker or agent involvement in the sales of
insurance products, whereas in others such involvement is optional;
. Restrictions on use of foreign reinsurers vary;
. In some jurisdictions policy forms and rates are regulated and must be
filed for certain lines of business, whereas in others they are
unregulated;
. Some jurisdictions require periodic on-site examinations by insurance
authorities, whereas others do not; and
. The ability to remit dividends is restricted more in some jurisdictions
than in others.
Significant variations can also be found in the size, structure and
resources of the local regulatory departments that oversee insurance
activities. There can also be notable differences among similar departments in
the rigor of regulatory enforcement.
ACE International operates through both subsidiaries and branches, the
latter of which generally have reduced local capital requirements, and certain
ACE International companies are jointly owned due to legal requirements for
local ownership. Regardless of the corporate structure, ACE International
companies can face greater restrictions than their domestic competitors, due to
multinational application of U.S. laws and otherwise. Operational challenges
can include discretionary licensing procedures, compulsory cessions of
reinsurance, local retention of funds and records, and foreign exchange
controls.
The complex regulatory environments in which ACE International operates are
subject to change and are regularly monitored.
Operations in the United States of America
Although at the present time there is limited federal regulation of the
insurance business in the U.S., the U.S. insurance subsidiaries are subject to
extensive regulation in the states in which they do business. The laws of the
various states establish supervisory agencies with broad authority to regulate,
among other things: licenses to transact business, soliciting business,
advertising, rates for certain business, policy language, underwriting and
claims practices, transactions with affiliates, reserve adequacy, dividends,
and insurer solvency. In addition, the U.S. insurance subsidiaries are subject
to judicial decisions that define the risks and benefits for which insurance is
sought and provided. These include judicial interpretations of the nature of
the insured risk in such areas as product liability and environmental
coverages.
Regulation varies from state to state but generally requires that each
primary insurance company obtain a license from the department of insurance of
a state to conduct business in that state. Regulations generally require
insurance and reinsurance companies to furnish information concerning
activities which may materially affect the operations, management or financial
condition and solvency of the company. A reinsurance company does not generally
need an insurance license to reinsure a U.S. ceding company. However, for a
U.S. ceding
19
company to obtain financial statement credit for reinsurance ceded, the
reinsurer must obtain an insurance license or accredited status from the
cedent's state of domicile or must post collateral to support the liabilities
ceded. In addition, regulations for reinsurers vary somewhat from primary
insurers in that reinsurers are typically not subject to regulator approval of
insurance policy forms or the rates agreed to between ceding insurers and their
reinsurers.
The U.S. insurance subsidiaries are required to file detailed annual and
quarterly reports with state insurance regulators in each of the states in
which they do business. Such annual and quarterly reports are required to be
prepared on a calendar year basis. In addition, the U.S. insurance
subsidiaries' operations and accounts are subject to examination at regular
intervals by state regulators. The respective reports filed in accordance with
applicable insurance regulations with respect to the most recent periodic
examinations of the U.S. insurance subsidiaries contained no material adverse
findings.
Statutory surplus is an important measure utilized by the regulators and
rating agencies to assess the Company's U.S. insurance subsidiaries' ability to
support business operations and provide dividend capacity. The Company's U.S.
insurance subsidiaries are subject to various state statutory and regulatory
restrictions that limit the amount of dividends that may be paid without prior
approval from regulatory authorities. These restrictions differ by state, but
are generally based on calculations incorporating statutory surplus, statutory
net income, and/or investment income.
State insurance regulators have adopted Risk Based Capital ("RBC")
requirements that are applicable to the U.S. insurance subsidiaries. These RBC
requirements are designed to monitor capital adequacy and to raise the level of
protection that statutory surplus provides for policyholders. The RBC formula
provides a mechanism for the calculation of an insurance company's Authorized
Control Level ("ACL") RBC amount. The initial RBC level which triggers
regulatory action is known as the Company Action Level. Failure to achieve this
level of RBC, which occurs if policyholders' surplus falls below 200 percent of
the ACL, requires the insurance company to submit a plan of corrective action
to the relevant insurance commissioner. Based on the RBC formula, at December
31, 1999, the policyholders' surplus of each of the ongoing U.S. insurance
subsidiaries was higher than the Company Action Level.
There are several additional progressive RBC failure levels, which trigger
more stringent regulatory action. An insurance commissioner may allow a
property and casualty company at or below the mandatory control level that is
writing no business and is running off its existing business to continue its
run-off. The Company's Brandywine subsidiary is running off their liabilities
consistent with the terms of an Order by the Commissioner of Pennsylvania which
includes periodic reporting obligations to the Pennsylvania Insurance
Department, as the Commission has determined that these subsidiaries have
sufficient assets to meet their obligations.
In November 1999, the U.S. Congress passed the Gramm-Leach-Bliley Act
("GLBA"), financial modernization legislation that reshapes the regulation of
the financial services industry in the United States. GLBA repeals provisions
of the Glass-Steagall Act and Bank Holding Company Act that had prevented
affiliation between banks, broker-dealers and insurers. This legislation
defines regulatory supervisory responsibility for newly created Financial
Holding Companies. The law purports largely to preserve functional regulation
of insurance companies and agents by state insurance departments. However,
until a number of Federal agencies finish issuing regulations implementing
their new regulatory authority over Financial Holding Companies, it is not
possible to predict the exact magnitude of the impact of GLBA on ACE. Further,
until the full extent of the integration of banking, securities and insurance
businesses is known, it is impossible to predict the impact of this law on
competition in the markets in which ACE operates.
Regulations regarding Non-U.S. Operations in the United States
The Company and its non-U.S. insurance subsidiaries, excluding its Lloyd's
operations, are not admitted to do business as insurers in any jurisdiction in
the U.S. Each state in the U.S. licenses insurers and prohibits, with some
exceptions, the sale of insurance by non-admitted insurers within its
jurisdictions.
20
Many states impose a premium tax (typically 2 percent to 4 percent of gross
premiums) on insureds obtaining insurance from non-admitted foreign insurers,
such as ACE Bermuda. The premiums charged by the non-U.S. insurer do not
include any U.S. state premium tax. Each insured is responsible for determining
whether it is subject to any such tax and for paying such tax as may be due.
The U.S. Internal Revenue Code also imposes on policyholders an excise tax
on insurance and reinsurance premiums paid to foreign insurers or reinsurers
with respect to risks located in the United States. The rates of tax applicable
to premiums paid to Bermuda domiciled companies are 4 percent for insurance
premiums and 1 percent for reinsurance premiums.
There can be no assurance that new or additional legislation in the U.S.
will not be proposed and enacted that has the effect of subjecting the
Company's non-U.S. insurance subsidiaries, including its Lloyd's operations to
regulation in the U.S.
Tax Matters
Corporate Income Tax
ACE Limited is a Cayman Islands corporation that operates as a holding
company with offices only in Bermuda and does not pay U.S. corporate income
taxes (other than withholding taxes on dividends or on intercompany interest
income) on the basis that it is not engaged in a trade or business in the U.S.
However, there can be no assurance that the Internal Revenue Service ("IRS")
will not contend to the contrary. If ACE Limited were subject to U.S. income
tax, there could be a material adverse effect on the Company's shareholders'
equity and earnings. ACE Limited and its Bermuda-based insurance and
reinsurance subsidiaries do not file U.S. income tax returns reporting income
subject to U.S. income tax since they do not conduct business within the U.S.
However, ACE Limited and its Bermuda-based insurance and reinsurance
subsidiaries have filed protective tax returns reporting no U.S. income to
preserve their ability to deduct their ordinary and necessary business expenses
should the IRS successfully challenge their contention that none of their
income is subject to a net income tax in the U.S.
Under current Cayman Islands law, ACE Limited is not required to pay any
taxes on its income or capital gains. ACE Limited has received an undertaking
that, in the event of any taxes being imposed, ACE Limited will be exempted
from taxation in the Cayman Islands until the year 2013.
Under current Bermuda law, ACE Limited and its Bermuda subsidiaries are not
required to pay any taxes on its income or capital gains. ACE Limited and the
Bermuda subsidiaries have received an undertaking from the Minister of Finance
in Bermuda that, in the event of any taxes being imposed, the Company will be
exempt from taxation in Bermuda until March 2016.
Income from the Company'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 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 personal accounts of the Names/Corporate Members in proportion
to their participation in the relevant syndicates. The Company'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 INA, ACE US Holdings and ACE Financial Services are subject to income
taxes imposed by U.S. authorities and file U.S. tax returns. Certain
international operations of the Company are also subject to income taxes
imposed by the jurisdictions in which they operate.
21
Related Person Insurance Income
Each U.S. person who beneficially owns Ordinary Shares of the Company
(directly or through foreign entities) on the last day of a non-U.S. insurance
company subsidiary's fiscal year will have to include in such person's gross
income for U.S. tax purposes a proportionate share (determined as described
herein) of the related person insurance income ("RPII") of such insurance
company subsidiary if the RPII of such insurance company subsidiary, determined
on a gross basis, is 20 percent or more of that insurance company subsidiary's
gross insurance income in such fiscal year. RPII is income attributable to
insurance policies where the direct or indirect insureds are U.S. shareholders
or are related to U.S. shareholders of the Company. RPII may be includible in a
U.S. shareholder's gross income for U.S. tax purposes regardless of whether or
not such shareholder is an insured.
For the calendar year ended December 31, 2000, the Company believes that
gross RPII of each of its insurance company subsidiaries was below 20 percent
for the year. Although no assurances can be given, the Company anticipates that
gross RPII of each of its non-U.S. insurance company subsidiaries will be less
than 20 percent of each such subsidiary's gross insurance income for subsequent
years and the Company will endeavor to take such steps as it determines to be
reasonable to cause its gross RPII to remain below such level.
The RPII provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), have never been interpreted by the courts. Regulations interpreting
the RPII provisions of the Code exist only in proposed form, having been
proposed on April 16, 1991. It is not certain whether these regulations will be
adopted in their proposed form or what changes or clarifications might
ultimately be made thereto or whether any such changes, as well as any
interpretation or application of RPII by the IRS, the courts, or otherwise,
might have retroactive effect.
Employees
At December 31, 2000, the Company employed a total of 7,933 persons.
Approximately 915 of the Company's employees are represented by various
collective bargaining agreements, all of whom are outside the U.S., United
Kingdom and Bermuda. Of these employees 298 are employed in the Far East and
565 in Europe. The remaining employees are in various countries in Latin
America and Asia Pacific.
Australia
North & New Asia Latin
Bermuda America Europe Zealand Pacific America Total
- ------- ------- ------ --------- ------- ------- -----
234 4,533 1,445 186 1,058 477 7,933
Item 2. Properties
The Company operates from offices in almost 50 countries around the world.
In Bermuda, the Company leases its principal offices from a joint venture
company in which the Company has a 40 percent interest and there is an
agreement with the joint venture partner which ensures the Company's ability to
occupy a portion of the building until 2011. The Company is currently building
a new corporate headquarters in Bermuda that will house the majority of its
Bermuda-based operations. This facility will be available during 2001. As part
of the Company's acquisition of ACE INA, ACE assumed the lease of Two Liberty
Place, in Philadelphia, which consists of approximately 1.25 million total
square feet, and various other leases and properties in the U.S. and other
countries. The majority of all office facilities throughout the world, that are
occupied by the Company and its subsidiaries, are leased. The Company is not
dependent on its facilities to conduct business.
22
Item 3. Legal Proceedings
The Company's 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 the
Company's subsidiaries which are typical to the insurance industry in general
and in the normal course of business, are considered in the Company's loss and
loss expense reserves which are discussed in the unpaid losses and loss
expenses discussion. In addition to claims litigation, the Company and its
subsidiaries 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,
inter alia, allegations of underwriting errors or misconduct, employment
claims, regulatory activity or disputes arising from the Company's business
ventures. While the outcomes of the business litigation involving ACE cannot be
predicted with certainty at this point, ACE is disputing and will continue to
dispute allegations against it that are without merit and believes that the
ultimate outcomes of matters in this category of business litigation will not
have a material adverse effect on its financial condition, future operating
results or liquidity.
Item 4. Submission Of Matters To A Vote Of Security Holders
No matters were submitted to a vote of stockholders during the fourth
quarter of the fiscal year covered by this report.
23
EXECUTIVE OFFICERS OF THE COMPANY
The table below sets forth the names, ages, positions and business
experience of the executive officers of the Company.
Name Age Position
---- --- --------
Brian Duperreault........ 53 Chairman, Chief Executive Officer & Director
Donald Kramer............ 63 Vice Chairman and Director
Dominic J. Frederico..... 47 Group President and Chief Executive Officer,
U.S. and Bermuda Group and President and Chief
Operating Officer, ACE Limited
John Engestrom........... 58 President and Chief Executive Officer, ACE
Tempest Reinsurance Company Limited
Mark Herman.............. 42 President and Chief Executive Officer, ACE
Bermuda Insurance Ltd.
Jerome F. Jurschak....... 53 President and Chief Executive Officer, ACE
Financial Services
Dennis B. Reding......... 52 President and Chief Executive Officer, ACE USA
Pierre Samson............ 36 President and Chief Executive Officer, ACE
Financial Solutions International, Ltd.
Gary Schmalzriedt........ 54 President and Chief Executive Officer, ACE
Europe and ACE Global Markets
B. Kingsley Schubert..... 54 Executive Vice President, Global Life Insurance,
ACE INA Holdings, Inc.
Christopher Z. Marshall.. 44 Chief Financial Officer
Peter N. Mear............ 56 General Counsel & Secretary
Keith P. White........... 57 Chief Administration Officer
Robert A. Blee........... 38 Chief Accounting Officer
John C. Burville......... 53 Chief Actuary
Timothy A. Boroughs...... 51 President and Chief Executive Officer, ACE Asset
Management, Inc.
Elizabeth Murphy......... 47 Treasurer
Brian Duperreault has been a director of ACE since October 1994. Mr.
Duperreault has served as Chairman and Chief Executive Officer of ACE since
November 1999 and as Chairman, President and Chief Executive Officer of ACE
from October 1994 through November 1999. Prior to joining ACE, Mr. Duperreault
had been employed with American International Group ("AIG") since 1973 and
served in various senior executive positions with AIG and its affiliates from
1978 until September 1994, most recently as Executive Vice President, Foreign
General Insurance and, concurrently, as Chairman and Chief Executive Officer of
American International Underwriters Inc., a subsidiary of AIG, from April 1994
to September 1994. Mr. Duperreault was President of American International
Underwriters Inc. from 1991 to April 1994, and Chief Executive Officer of AIG
affiliates in Japan and Korea from 1989 until 1991.
Donald Kramer has been a director and Vice Chairman of ACE since July 1996,
following the acquisition of ACE Tempest Re. Mr. Kramer served as Chairman or
Co-Chairman of the Board of Tempest from its formation in September 1993 until
July 1996 and was President of ACE Tempest Re from July 1996 until 1999. ACE
Tempest Re was acquired by the Company on July 1, 1996. Prior to the formation
of ACE Tempest Re, he was President of Kramer Capital Corporation (venture
capital investments) from March to September 1993, President of Carteret
Federal Savings Bank (banking) from August 1991 to March 1993, Chairman of the
Board of NAC Re Corporation (reinsurance) from June 1985 to June 1993, Chairman
of the Board and
24
Chief Executive Officer of KCP Holding Company (insurance) from July 1986 to
August 1991 and of its affiliates, KCC Capital Managers (insurance investments)
and Kramer Capital Consultants, Inc. (insurance investments), as well as
Chairman of the Board of its subsidiary, National American Insurance Company of
California (insurance) from September 1988 to August 1991.
Dominic J. Frederico has served as President and Chief Operating Officer of
ACE and Chairman of ACE INA since November 1999. On February 1, 2001, Mr.
Frederico broadened his responsibilities by becoming Group President & Chief
Executive Officer of the U.S. and Bermuda Group. Mr. Frederico has also served
as Chairman, President and Chief Executive Officer of ACE INA from May 1999
through November 1999. Mr. Frederico previously served as President of ACE
Bermuda since July 1997, Executive Vice President, Underwriting since December
1996, and as Executive Vice President, Financial Lines from January 1995 to
December 1996. Mr. Frederico served in various capacities at AIG in Europe and
the U.S. from 1982 to January 1995, most recently as Senior Vice President and
Chief Financial Officer of an AIG subsidiary, with multi-regional general
management responsibilities.
John Engestrom has served as President and Chief Executive Officer of ACE
Tempest Re since May 1999. From 1997 to May 1999, Mr. Engestrom served as Chief
Executive Officer of Liberty Re in London. From 1992 to 1997, Mr. Engestrom
served as Group Chief Executive of Mercantile and General Reinsurance Company.
Mr. Engestrom began his reinsurance career at Skandia where he held various
positions including Chief Operating Officer Treaty division Europe, Chief
Underwriting Officer North America and finally head of Reinsurance Skandia
Group worldwide.
Mark Herman was appointed President and Chief Executive Officer of ACE
Bermuda on February 1, 2001. Mr. Herman joined ACE in 1995 as Senior Vice
President Underwriting Manager. In 1999, Mr. Herman was appointed head of the
ACE Bermuda Professional Lines and Casualty Divisions. Prior to joining ACE,
Mr. Herman served as Vice President and Overseas Operations Manager of Chubb &
Son, Inc.
Jerome F. Jurschak joined ACE in December 1999 as President and Chief
Executive Officer of ACE Financial Services when ACE acquired Capital Re. Mr.
Jurschak previously served as Chief Executive Officer and President of Capital
Re from 1998 to 1999. Mr. Jurschak joined Capital Re in 1987 and served as its
Chief Underwriting Officer from 1987 to 1998. Prior to joining Capital Re, Mr.
Jurschak was Senior Vice President and Chief Underwriting Officer of financial
guaranty reinsurance for Guaranty Holdings Corporation, a subsidiary of the Old
Republic Insurance Company.
Dennis B. Reding joined ACE in 1998 as President and Chief Executive Officer
of ACE USA when the Company acquired Westchester Specialty Group Inc. ("WSG").
In July 1999, his role as President and Chief Executive Officer of ACE USA
expanded to include the domestic operations of ACE INA. Mr. Reding previously
served as President and Chief Executive Officer of WSG, a position he held
since July 1993. Prior to joining WSG, Mr. Reding served in various senior
positions at Fireman's Fund Insurance Company.
Pierre Samson serves as President and Chief Executive Officer of ACE
Financial Solutions International, Ltd. ("ACE FSI"). ACE FSI is a subsidiary of
the ACE Group of Companies that provides non-traditional insurance and finance-
related solutions to international companies facing complex risk management
issues. Mr. Samson joined ACE in early 1995, when a new alternative risk
division was created at ACE Bermuda. Mr. Samson headed this division from 1997
until the recent creation of ACE FSI. Prior to joining ACE, Mr. Samson worked
for Tillinghast, a leading firm of consulting actuaries in Bermuda and London.
Gary Schmalzriedt was appointed President and Chief Executive Officer of ACE
Europe & ACE Global Markets on February 1, 2001. Previously Mr. Schmalzriedt
was President and Chief Executive Officer of ACE Bermuda from July 1999 until
February 2001. From 1991 to 1999, Mr. Schmalzriedt served in several senior
capacities with CIGNA, most recently, in 1998, serving as Chairman and Chief
Executive Officer of CIGNA Europe. Mr. Schmalzriedt originally joined CIGNA as
Senior Vice President, Property Underwriting and later became responsible for
managing CIGNA International's property and casualty related businesses. Prior
to
25
joining CIGNA, Mr. Schmalzriedt spent nearly 20 years in various positions of
increasing responsibility with AIG, including assignments in the U.K. and South
Africa and most recently, Senior Vice President and Senior Underwriting Officer
of American International Underwriters, where he managed AIG's foreign
operations.
B. Kingsley Schubert was appointed Executive Vice President, Global Life
Insurance of ACE INA Holdings, Inc on February 1, 2001. He previously served as
President and Chief Executive Officer of ACE International from July 1999 until
February 2001. Mr. Schubert served as President of CIGNA International Property
and Casualty from January 1999 to July 1999, and as President of CIGNA
International from February 1996 to January 1999. Mr. Schubert served as Senior
Vice President of CIGNA International (Asia-Pacific) from March 1995 to
February 1996, and as President of CIGNA Insurance Company in Japan from June
1992 to February 1996.
Christopher Z. Marshall joined ACE in 1986 and has held a number of senior
positions at ACE, most recently as Chief Financial Officer since November 1992.
On February 21, 2001, it was announced that Mr. Marshall would be appointed
Assistant to the Chairman, Strategic Initiatives, once a successor can be named
to replace him as Chief Financial Officer. Mr. Marshall previously served as
Senior Vice President, Finance from January 1990 to November 1992.
Peter N. Mear has served as General Counsel and Secretary of ACE since April
1996. Mr. Mear served as Vice President and Claims Counsel of Aetna Casualty
and Surety Company from February 1991 to April 1996 and Counsel and Litigation
Section Head of Aetna Life & Casualty from September 1977 to February 1991.
Keith P. White has served as Chief Administration Officer of ACE Limited
since July 1, 1997. Mr. White previously served as Senior Vice President,
Administration of ACE Bermuda since January 1990.
Robert A. Blee has served as Chief Accounting Officer of ACE since October
1998. Mr. Blee served as Group Controller of ACE from January 1997 to October
1998, Vice President, Finance of ACE from July 1996 to January 1997, Assistant
Vice President and Assistant Controller from October 1994 to July 1996 and
Chief Accountant from August 1993 to October 1994.
John C. Burville has served as Chief Actuary of ACE since January 1992. Mr.
Burville served as Managing Actuarial Consultant with Tillinghast, Nelson &
Warren (Bermuda) Ltd. (management consulting and actuaries) from March 1986 to
December 1991.
Timothy A. Boroughs joined ACE in June 2000 as President and Chief Executive
Officer of ACE Asset Management, Inc. Mr. Boroughs previously served as the
Director of Fixed Income at Tudor Investment Corporation from 1997 until June
2000. From 1976 to 1997, Mr. Boroughs held several positions at Fisher, Frances
Trees & Watts, as U.S. based institutional investor advisor, most recently as
Managing Partner and Director, Global Leverage of Investment Activity.
Elizabeth Murphy was appointed Treasurer in January 2001. Mrs. Murphy joined
ACE Tempest Re at its formation in 1993 as Vice President and Controller. From
October 1995 to December 2000, Mrs. Murphy served as Senior Vice President and
Chief Financial Officer of ACE Tempest Re.
26
PART II
Item 5. Market for the Registrant's Ordinary Shares and Related Stockholder
Matters
(a) The Company's Ordinary Shares, par value $0.041666667 per share, have
been listed on the New York Stock Exchange since March 25, 1993, under the
symbol ACL. The symbol is being changed to ACE from ACL on March 30, 2001. On
November 13, 1997, the Company declared a three-for-one split of the Company's
stock. The stock split was voted on and approved by the shareholders of the
company on February 6, 1998. The record date for determining those shareholders
entitled to receive certificates representing additional shares pursuant to the
stock split was as of close of business on February 17, 1998. Certificates
representing the additional shares of stock were mailed on March 2, 1998.
The following table sets forth the high and low closing sales prices of the
Company's Ordinary Shares per fiscal quarters, as reported on the New York
Stock Exchange Composite Tape for the periods indicated:
2000 1999
------------------ ------------------
High Low High Low
-------- --------- -------- ---------
Quarter ending March................... $ 22 7/8 $14 11/16 $33 5/8 $25 15/16
Quarter ending June.................... 30 7/16 20 1/2 34 7/8 27 3/8
Quarter ending September............... 39 3/4 27 9/16 28 7/16 16 9/16
Quarter ending December................ 43 9/16 33 9/16 21 9/16 15 1/2
The last reported sale price of the Ordinary Shares on the New York Stock
Exchange Composite Tape on March 15, 2001 was $38.00.
(b) The approximate number of record holders of Ordinary Shares as of March
15, 2001 was 2,189.
(c) The following table represents dividends paid per share to shareholders
of record on each of the following dates.
2000 1999
----- -----
Shareholders of Record as of:
March 31..................................................... $0.11 $0.09
June 30...................................................... $0.13 $0.11
September 30................................................. $0.13 $0.11
December 31.................................................. $0.13 $0.11
On April 14, 1998, the Company sold 16.5 million Ordinary Shares for net
proceeds of approximately $606 million. On September 12, 2000, the Company
completed the sale of 12.25 million Ordinary Shares for net proceeds of
approximately $400 million.
ACE is a holding company whose principal source of income is investment
income and dividends from its operating subsidiaries. The ability of the
operating subsidiaries to pay dividends to ACE and the Company's ability to pay
dividends to its shareholders are each subject to legal and regulatory
restrictions. The declaration and payment of future dividends will be at the
discretion of the Board of Directors and will be dependent upon the profits and
financial requirements of the Company and other factors, including legal
restrictions on the payment of dividends and such other factors as the Board of
Directors deems relevant. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition Liquidity and Capital Resources" in the
2000 Annual Report to Shareholders filed with this Form 10-K.
Item 6. Selected Financial Data
Selected financial data for the two years ended December 31, 2000 and 1999,
the three month period ended December 31, 1998, and the three years ended
September 30, 1998, is incorporated by reference to page 3 of the 2000 Annual
Report to Shareholders filed in Exhibit 13.1 filed with this Form 10-K.
27
Item 7. Management's Discussion and Analysis of Results of Operations And
Financial Condition
This item is incorporated by reference to pages 32 through 50 of the 2000
Annual Report to Shareholders filed in Exhibit 13.1 filed with this Form 10-K.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
This item is incorporated by reference to page 49 of the 2000 Annual Report
to Shareholders filed in Exhibit 13.1 filed with this Form 10-K.
Item 8. Financial Statements and Supplementary Data
This item is incorporated by reference to pages 51 through 93 of the 2000
Annual Report to Shareholders filed in Exhibit 13.1 filed with this Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no changes in nor any disagreements with accountants on
accounting and financial disclosure within the two years ended December 31,
2000.
28
PART III
Item 10. Directors and Executive Officers of the Registrant
This item is incorporated by reference to the sections entitled "Election of
Directors-Nominees for Election to Terms Expiring in 2004" and "Election of
Directors-Directors Whose Terms of Office Will Continue After This Meeting" of
the definitive proxy statement for the Annual General Meeting of Shareholders
to be held on May 11, 2001, which involves the election of directors and will
be filed with the Securities and Exchange Commission not later than 120 days
after the close of the fiscal year pursuant to regulation 14A.
Item 11. Executive Compensation
This item is incorporated by reference to the section entitled "'Executive
Compensation" of the definitive proxy statement for the Annual General Meeting
of Shareholders to be held on May 11, 2001, which will be filed with the
Securities and Exchange Commission not later than 120 days after the close of
the fiscal year pursuant to regulation 14A.
Item 12. Security Ownership and Certain Beneficial Owners and Management
This item is incorporated by reference to the section entitled "Beneficial
Ownership of Ordinary Shares" of the definitive proxy statement for the Annual
General Meeting of Shareholders to be held on May 11, 2001, which will be filed
with the Securities and Exchange Commission not later than 120 days after the
close of the fiscal year pursuant to regulation 14A.
Item 13. Certain Relationships and Related Transactions
This item is incorporated by reference to the section entitled "Election of
Directors-Certain Business Relationships" of the definitive proxy statement for
the Annual General Meeting of Shareholders to be held on May 11, 2001, which
will be filed with the Securities and Exchange Commission not later than 120
days after the close of the fiscal year pursuant to regulation 14A.
29
PART IV
Item 14. Exhibits, Financial Statements, Schedules And Reports On Form-8-K
(a) Financial Statements, Schedules and Exhibits
1. Financial Statements
The following is a list of financial statements filed as part of this
Report, all of which have been incorporated by reference to the material in the
2000 Annual Report to Shareholders as described under Item 8 of this Report
-- Report of Independent Accountants
-- Consolidated Balance Sheets at December 31, 2000 and 1999
-- Consolidated Statements of Operations for the years ended December 31,
2000 and 1999, the three months ended December 31, 1998, and the year
ended September 30, 1998
-- Consolidated Statements of Shareholders' Equity for the years ended
December 31, 2000 and 1999, the three months ended December 31, 1998,
and the year ended September 30, 1998
-- Consolidated Statements of Comprehensive Income for the years ended
December 31, 2000 and 1999, the three months ended December 31, 1998,
and the year ended September 30, 1998
-- Consolidated Statements of Cash Flows for the years ended December 31,
2000 and 1999, the three months ended December 31, 1998, and the year
ended September 30, 1998
-- Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
Included in Part IV of this report.
Schedule
Number Page
-------- ----
-- Report of Independent Accountants on financial statement
schedules included in Form 10-K........................... 35
-- Summary of Investments.................................... I 36
-- Condensed financial information of the Registrant as of
December 31, 2000 and 1999, and for the years ended
December 31, 2000 and 1999, the three months ended
December 31, 1998, and the year ended September 30, 1998.. II 37
-- Supplemental information concerning Property/Casualty
Insurance Operations...................................... VI 40
Other schedules have been omitted as they are not applicable to the Company,
or the required information has been included in the financial statements and
related notes.
3. Exhibits
2.1 Amended and Restated Agreement and Plan of Merger, dated as of October
26, 1999, among Capital Re Corporation, ACE Limited and CapRe
Acquisition Corp. (Incorporated by reference to Exhibit 2.1 to
Registration Statement on Form S-4 (No. 333-90927))
2.2 First Amendment to Amended and Restated Agreement and Plan of Merger,
dated as of November 29, 1999, among Capital Re Corporation, ACE Limited
and CapRe Acquisition Corp. (Incorporated by reference to Exhibit 2.5 to
Registration Statement on Form S-4 (No. 33-90927))
2.3 Acquisition Agreement, dated as of January 11, 1999, among CIGNA
Corporation, CIGNA Holdings, Inc. and ACE Limited (Incorporated by
reference to Exhibit 2.1 of the Form 8-K current report (Date of
earliest event reported: July 2, 1999)
30
2.4 Amendment No. 1 to Acquisition Agreement, dated as of July 2, 1999,
CIGNA Corporation, CIGNA Holdings, Inc. and ACE Limited (Incorporated
by reference to Exhibit 2.2 of the Form 8-K current report (Date of
earliest event reported: July 2, 1999))
2.5 Amendment No. 2 to Acquisition Agreement, dated as of July 2, 1999,
CIGNA Corporation, CIGNA Holdings, Inc. and ACE Limited (Incorporated
by reference to Exhibit 2.3 of the Form 8-K current report (Date of
earliest event reported: July 2, 1999))
3.1 Memorandum of Association of the Company (Incorporated by reference to
Exhibit 3.1 to Form 10-K for the year ended September 30, 1998)
3.2 Articles of Association of the Company (Incorporated by reference to
Exhibit 3.2 to Form 10-K for the year ended September 30, 1998)
4.1 Memorandum of Association of the Company (see Exhibit 3.1)
4.2 Articles of Association of the Company (see Exhibit 3.2)
4.3 Specimen certificate representing Ordinary Shares (Incorporated by
reference to Exhibit 3.1 to the Registration Statement on Form S-1 of
the Company (No. 33-57206))
4.4 Form of the Declaration of Terms of Capital Re LLC 7.65% Cumulative
Monthly Income Preferred Shares, Series A, January 24, 1994
(Incorporated by reference to Exhibit 4.2 to Capital Re's Registration
Statement on Form S-3 (Reg. No. 33-72090))
4.5 Form of Liability Assumption Agreement dated as of January 24, 1994,
between Capital Re Corporation and Capital Re LLC (Incorporated by
reference to Exhibit 99.2 to Capital Re's Registration Statement on
Form S-3 (Reg. No. 33-72090))
4.6 Form of Loan Agreement dated as of January 24, 1994, between Capital Re
Corporation and Capital Re LLC (Incorporated by reference to Exhibit
99.1 to Capital Re's Registration Statement on Form S-3 (Reg. NO. 33-
72090))
4.7 Form of Payment and Guarantee Agreement dated as of January 24, 1999,
by Capital Re Corporation and Capital Re LLC (Incorporated by reference
to Exhibit 4.1 to Capital Re's Registration Statement on Form S-3 (Reg.
No. 33-72090))
10.1* ACE Limited Annual Performance Incentive Plan (Incorporated by
reference to Exhibit 10.13 to the Registration Statement on Form S-1 of
the Company (No. 33-57206))
10.2* ACE Limited Equity Linked Incentive Plan (Incorporated by reference to
Exhibit 10.14 to the Registration Statement on Form S-1 of the Company
(No. 33-57206))
10.3* Amendment to ACE Limited Equity Linked Incentive Plan (Incorporated by
reference to Exhibit 10.15 to the Registration Statement on Form S-1 of
the Company (No. 33-57206))
10.4* ACE Limited Employee Retirement Plan, as amended through January 1,
1999 (Incorporated by reference to Exhibit 10.4 to Form 10-K of the
Company for the year ended December 31, 1999)
10.5* ACE Limited Supplement Retirement Plan (Incorporated by reference to
Exhibit 10.25 to the Registration Statement on Form S-1 of the Company
(No. 33-57206))
10.6* First Amendment to ACE Limited Supplement Retirement Plan (Incorporated
by reference to Exhibit 10.26 to the Registration Statement on Form S-1
of the Company (No. 33-57206))
10.7* Second Amendment to ACE Limited Supplement Retirement Plan
(Incorporated by reference to Exhibit 10.27 to the Registration
Statement on Form S-1 of the Company (No. 33-57206))
10.8* Form of restricted stock award dated August 24, 1993, to ACE Limited
Directors (Incorporated by reference to Exhibit 10.39 to Form 10-K of
the Company for the year ended September 30, 1993)
10.9* Employment Agreement, dated October 1, 1994, between ACE Limited and
Brian Duperreault (Incorporated by reference to Exhibit 10.42 to Form
10-K of the Company for the year ended September 30, 1994)
10.10* Employment Agreement, dated January 9, 1995, between ACE Limited and
Dominic J. Frederico (Incorporated by reference to Exhibit 10.45 to
Form 10-K of the Company for the year ended September 30, 1995)
10.11* Second amendment to ACE Limited Equity Linked Incentive Plan
(Incorporated by reference to Exhibit 10.45 to Form 10-K of the Company
for the year ended September 30, 1995)
10.12* ACE Limited 1995 Long Term Incentive Plan (Incorporated by reference to
Exhibit 10.35 to Form 10-Q of the Company for the quarter ended March
31, 1996)
10.13* Employee Stock Purchase Plan (Incorporated by reference to Exhibit
10.36 to Form 10-Q of the Company for the quarter ended March 31, 1996)
10.14* 1995 Outside Directors Plan (Incorporated by reference to Exhibit 10.37
to Form 10-Q of the Company for the quarter ended March 31, 1996)
31
10.15* ACE Limited 1996 Tempest Replacement Option Plan (Incorporated by
reference to Exhibit 10.24 to Form 10-K of the Company for the year
ended September 30, 1996)
10.16* First Amendment of ACE Limited 1995 Long Term Incentive Plan
(Incorporated by reference to Exhibit 10.27 to Form 10-K of the Company
for the year ended September 30, 1996)
10.17* Third Amendment to Equity Linked Incentive Plan-Stock Appreciation
Right Plan (Incorporated by reference to Exhibit 10.28 to Form 10-Q of
the Company for the quarter ended March 31,1997)
10.18* First Amendment of ACE Limited 1995 Outstanding Directors Plan
(Incorporated by reference to Exhibit 10.29 to Form 10-Q of the Company
for the quarter ended June 30, 1997)
10.19* ACE Limited Elective Deferred Compensation Plan (Incorporated by
reference to Exhibit 10.1 to Form 10-Q of the Company for the quarter
ended December 31, 1997)
10.20* ACE Limited Rules of the Approved U.K. Stock Option Program
(Incorporated by reference to Exhibit 10.1 to Form 10-Q of the Company
for the quarter ended December 31, 1997)
10.21 ACE US Holdings, Inc. Credit Sensitive Senior Notes due 2008 Indenture
dated as of October 27, 1998 (Incorporated by reference to Exhibit
10.37 of Form 10-K of the Company for the year ended September 30,
1998)
10.22* ACE Limited 1998 Long-Term Incentive Plan (as amended through the first
amendment) (Incorporated by reference to Exhibit 10.1 to the Form 10-Q
of the Company for the quarter ended December 31, 1998)
10.23* ACE Limited Rules of the Approved U.K. Stock Option Program
(Incorporated by reference to Exhibit 10.1 to Form 10-Q of the Company
for the quarter ended December 31, 1997)
10.24 Information Technology Services Agreement, dated as of June 29, 1999,
among ACE INA Holdings Inc. and International Business Machines
Corporation (Incorporated by reference to Exhibit 99.1 of the Form 8-K
current report (Date of earliest event reported: July 2, 1999))
10.25 Remarketing and Contingent Purchase Agreement, dated June 30, 1999,
among ACE Limited, ACE INA Holdings Inc., ACE RHINOS Trust and Banc of
America Securities LLC (Incorporated by reference to Exhibit 99.2 of
the Form 8-K current report (Date of earliest event reported: July 2,
1999))
10.26 Indenture, dated as of June 15, 1999, between ACE RHINOS Trust,
Holdings and The First National Bank of Chicago, as Trustee
(Incorporated by reference to Exhibit 99.4 of the Form 8-K current
report (Date of earliest event reported: July 2, 1999))
10.27 Supplemental Indenture, dated as of June 30, 1999, between ACE RHINOS
Trust, Holdings and The First National Bank of Chicago, as Trustee
(Incorporated by reference to Exhibit 99.5 of the Form 8-K current
report (Date of earliest event reported: July 2, 1999)
10.28* Second Amendment of the ACE Limited 1995 Outside Directors Plan
(Incorporated by reference to Exhibit 10.1 to the Form 10-Q of the
Company for the quarter ended June 30, 1999)
10.29* Third Amendment of the ACE Limited 1995 Outside Directors Plan
(Incorporated by reference to Exhibit 10.2 to the Form 10-Q of the
Company for the quarter ended June 30, 1999)
10.30 Senior Indenture, dated as of August 1, 1999, among ACE INA Holdings,
Inc., ACE Limited and Bank One, NA (formerly The First National Bank of
Chicago), as trustee (Incorporated by reference to Exhibit 4.5 to
registration statement on Form S-1 of the Company (No. 333-78841))
10.31* ACE Limited 1999 Replacement Long Term Incentive Plan (Incorporated by
reference to Exhibit 10.1 to the Form 10-Q of the Company for the
quarter ended September 30, 1999)
10.32 Indenture, dated as of November 30, 1999, among ACE INA Holdings, Inc.
and Bank One Trust Company, N.A., as trustee (Incorporated by reference
to Exhibit 10.38 to Form 10-K of the Company for the year ended
December 31, 1999)
10.33 Supplemental Indenture No. 1, dated as of December 6, 1999, among ACE
INA Holdings, Inc. and Bank One Trust Company, N.A., as trustee
(Incorporated by reference to Exhibit 10.39 to Form 10-K of the Company
for the year ended December 31, 1999)
10.34 Amended and Restated Trust Agreement, dated December 20, 1999, among
ACE INA Holdings, Inc., Bank One Trust Company, National Association,
as property trustee, Bank One Delaware Inc., as Delaware trustee and
the administrative trustees named therein (Incorporated by reference to
Exhibit 10.40 to Form 10-K of the Company for the year ended December
31, 1999)
10.35 Indenture, dated as of December 1, 1999, among ACE INA Holdings, Inc.,
ACE Limited and Bank One Trust Company, National Association
(Incorporated by reference to Exhibit 10.41 to Form 10-K of the Company
for the year ended December 31, 1999)
32
10.36 Common Securities Guarantee Agreement, dated as of December 20, 1999
(Incorporated by reference to Exhibit 10.42 to Form 10-K of the Company
for the year ended December 31, 1999)
10.37 Preferred Securities Guarantee Agreement, dated as of December 20, 1999
(Incorporated by reference to Exhibit 10.43 to Form 10-K of the Company
for the year ended December 31, 1999)
10.38* Service Agreement between ACE London Services Limited and John Robert
Charman dated July 9, 1998 (Incorporated by reference to Exhibit 10.44
to Form 10-K of the Company for the year ended December 31, 1999)
10.39* Deed of Covenant dated July 9, 1998, between John Robert Charman and
Tarquin Limited (Incorporated by reference to Exhibit 10.45 to Form 10-
K of the Company for the year ended December 31, 1999)
10.40* Consulting Agreement dated as of January 1, 2000, between Kramer
Capital Corp. and the Company (Incorporated by reference to Exhibit
10.46 to Form 10-K of the Company for the year ended December 31, 1999)
10.41* Promissory note from Dominic Frederico (Incorporated by reference to
Exhibit 10.47 to Form 10-K of the Company for the year ended December
31, 1999)
10.42 $75 million Credit Facility (subsequently amended to $100 million)
between Capital Re Company, Various Banks and Deutsche Bank AG, as
Agent (Incorporated by reference to Exhibit 4.09 to the Annual Report
on Form 10-K for Capital Re Corporation for the fiscal year ended
December 31, 1994 (Comm. File No. 1-10995))
10.43 Reimbursement Agreement dated as of September 8, 1999, among ACE
Limited, ACE Bermuda Insurance Ltd., ACE Tempest Reinsurance Ltd.,
(formerly known as Tempest Reinsurance Company Limited), as account
parties, various banks, financial institutions and other institutional
lenders, Mellon Bank, N.A., as issuing bank, Deutsche Bank of AG, New
York and/or Cayman Islands Branches and Fleet National Bank as
documentation agents, and Mellon Bank, N.A. as administrative agent
(Incorporated by reference to Exhibit 10.52 to Form 10-K of the Company
for the year ended December 31, 1999)
10.44* ACE Limited 1999 Replacement Stock Plan (Incorporated by reference to
Exhibit 10.54 to Form 10-K of the Company for the year ended December
31, 1999)
10.45 Amendment dated as of January 27, 1998, to $100 Million Credit Facility
between Capital Reinsurance Company, Various Banks and Deutsche Bank
AG, as Agent (Incorporated by reference to Exhibit 4.11 to Form 10-K
for the year ended December 31, 1997 for Capital Re Corporation (Comm.
File No. 1-10995))
10.46 Amendment dated as of March 22, 1999, to $100 Million Credit Facility
between Capital Reinsurance Company, Various Banks and Deutsche Bank
AG, as Agent (Incorporated by reference to Exhibit 4.11 to Form 10-K
for the year ended December 31, 1998 for Capital Re Corporation (Comm.
File No. 1-10995))
10.47 Purchase Contract Agreement, dated as of April 12, 2000, between ACE
Limited and The Bank of New York, acting as purchase contract agent for
the Holders of Securities (Incorporated by reference to Exhibit 10.2 to
Form 10-Q of the Company for the quarter ended March 31, 2000)
10.48 Remarketing Agreement, dated as of April 12, 2000, among ACE Limited,
The Bank of New York and Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated (Incorporated by reference to Exhibit 10.3
to Form 10-Q of the Company for the quarter ended March 31, 2000)
10.49 Pledge Agreement, dated as of April 12, 2000, among ACE Limited; The
Bank of New York, as Collateral Agent, Custodial Agent and Securities
Intermediary; and The Bank of New York, as Purchase Contract Agent
(Incorporated by reference to Exhibit 10.4 to Form 10-Q of the Company
for the quarter ended March 31, 2000)
10.50* ACE USA Officer Deferred Compensation Plan (as amended through January
1, 2000) (Incorporated by reference to Exhibit 10.5 to Form 10-Q of the
Company for the quarter ended March 31, 2000)
10.51* ACE USA Supplemental Employee Retirement Savings Plan (Incorporated by
reference to Exhibit 10.6 to Form 10-Q of the Company for the quarter
ended March 31, 2000)
10.52 Amendment to Reimbursement Agreement dated as of March 15, 2000, among
ACE Limited, ACE Bermuda Insurance Ltd., ACE Tempest Reinsurance Ltd.
(formerly known as Tempest Reinsurance Company Limited), Deutsche Bank
AG, New York and/or Cayman Islands Branches and Fleet National Bank as
Documentation Agents, and Mellon Bank, as Issuing Bank and
Administrative Agent. (Incorporated by reference to Exhibit 10.9 to
Form 10-Q of the Company for the quarter ended March 31, 2000)
10.53 Amended and Restated Five Year Credit Agreement among ACE Limited, ACE
Bermuda Insurance Company Ltd., ACE INA Holdings, Inc. and ACE
Financial Services, Inc., Mellon Bank, N.A., Bank of America, N.A. and
The Chase Manhattan Bank, dated May 8, 2000 (Incorporated by reference
to Exhibit 10.1 to Form 10-Q of the Company for the quarter ended June
30, 2000)
33
10.54 Amended and Restated 364 Day Credit Agreement among ACE Limited, ACE
Bermuda Insurance Ltd., ACE Tempest Reinsurance Ltd. (formerly known as
Tempest Reinsurance Company Limited), ACE INA Holdings Inc., ACE
Guaranty Re Inc., Bank of America, N.A., The Chase Manhattan Bank and
Morgan Guaranty Trust Company of New York dated May 8, 2000
(Incorporated by reference to Exhibit 10.2 to Form 10-Q of the Company
for the quarter ended June 30, 2000)
10.55 Third Amendment to Reimbursement Agreement amends the Reimbursement
Agreement, dated as of September 8, 1999, and amended as of November
30, 1999 and as of March 15, 2000, among ACE Limited, ACE Bermuda
Insurance Ltd., ACE Tempest Reinsurance Ltd. (formerly known as Tempest
Reinsurance Company Limited), Deutsche Bank AG, New York and/or Cayman
Islands Branches and Fleet National Bank, as Documentation Agents, and
Mellon Bank, N.A dated September 1, 2000 (Incorporated by reference to
Exhibit 10.2 to Form 10-Q of the Company for the quarter ended
September 30, 2000)
10.56 Fourth Amendment to Reimbursement Agreement which amends the
Reimbursement Agreement, dated as of September 8, 1999, and amended as
of November 30, 1999, as of March 15, 2000 and as of September 1, 2000,
among ACE Limited, ACE Bermuda Insurance Ltd. ACE Tempest Reinsurance
Ltd. (formerly known as Tempest Reinsurance Company Limited), Deutsche
Bank AG, New York and/or Cayman Islands Branches and Fleet National
Bank, as Documentation Agents, and Mellon Bank, N.A., as Issuing Bank
and Administrative Agent dated as of October 5, 2000 (Incorporated by
reference to Exhibit 10.3 to Form 10-Q of the Company for the quarter
ended September 30, 2000)
10.57 The first amendment which amends the Amended and Restated Five Year
Credit Agreement dated as of May 8, 2000, among ACE Limited, ACE
Bermuda Insurance Ltd. ACE Tempest Reinsurance Ltd., (formerly known as
Tempest Reinsurance Company Limited), ACE INA Holdings Inc. and ACE
Financial Services, Inc., various financial institutions, and Morgan
Guaranty Trust Company of New York, as administrative agent dated as of
October 23, 2000 (Incorporated by reference to Exhibit 10.4 to Form 10-
Q of the Company for the quarter ended September 30, 2000)
10.58 The first amendment which amends the Amended and Restated 364-Day
Credit Agreement dated as of May 8, 2000, among ACE Limited, ACE
Bermuda Insurance Ltd., ACE Tempest Reinsurance Ltd., (formerly known
as Tempest Reinsurance Company Limited), ACE INA Holdings Inc. and ACE
Guaranty Re Inc., various financial institutions and Morgan Guaranty
Trust Company of New York ("MGT"), as administrative agent dated as of
October 23, 2000 (Incorporated by reference to Exhibit 10.5 to Form 10-
Q of the Company for the quarter ended September 30, 2000)
10.59* First Amendment to ACE Limited Employee Stock Purchase Plan
10.60* Amendment to ACE Limited Employee Retirement Plan effective as of
January 1, 2000.
10.61 Amendment and Restatement Agreement relating to a Letter of Credit
Facility Agreement dated November 17, 2000 among ACE Limited, ACE
Bermuda Insurance Ltd., Citibank, N.A., as arranger, Barclays Bank plc
and ING Barings, as co-arrangers and Citibank International plc, as
agent
13.1 Pages 3 and 32 through 93 of the 2000 Annual Report to Shareholders
21.1 Subsidiaries of the Company
23.1 Consent of PricewaterhouseCoopers LLP
* Management Contract or Compensation Plan
(b) Reports on Form 8-K
The Company filed a Form 8-K current report (date of earliest event
reported: December 12, 2000), pertaining to legal action initiated against
CIGNA Corporation for breach of contract arising from ACE's $3.45 billion
acquisition of CIGNA's property and casualty business.
34
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT
SCHEDULES INCLUDED IN FORM 10-K
Our report on the consolidated financial statements of ACE LIMITED AND
SUBSIDIARIES has been incorporated by reference in this Form 10-K from page 52
of the 2000 Annual Report to Shareholders of ACE Limited. In connection with
our audits of such financial statements, we have also audited the related
financial statement schedules listed in item 14 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as whole,
present fairly, in all material respects, the information required to be
included therein.
PricewaterhouseCoopers LLP
New York, New York
February 14, 2001
35
SCHEDULE I
SUMMARY OF INVESTMENTS--OTHER THAN INVESTMENTS IN RELATED PARTIES
ACE LIMITED AND SUBSIDIARIES
December 31, 2000
Cost or Amount
Amortized at which shown in
Cost Fair Value the balance sheet
----------- ----------- -----------------
(in thousands of U.S. dollars)
Fixed maturities:
Bonds:
U.S. Treasury and agency........... $ 1,179,018 $ 1,216,544 $ 1,216,544
Non-U.S. governments............... 277,536 284,921 284,921
Corporate securities............... 5,450,681 5,378,203 5,378,203
Mortgage-backed securities......... 1,689,849 1,712,949 1,712,949
States, municipalities and
political subdivision............. 2,043,853 2,128,692 2,128,692
----------- ----------- -----------
Total fixed maturities........... 10,640,937 10,721,309 10,721,309
=========== =========== ===========
Equity securities:
Common stock:
Public utilities................... 41,479 48,239 48,239
Banks, trust and insurance
companies......................... 53,979 72,042 72,042
Industrial, miscellaneous and all
other............................. 396,839 409,808 409,808
Non redeemable preferred stock....... 2,752 1,957 1,957
----------- ----------- -----------
Total equity securities.......... 495,049 532,046 532,046
----------- ----------- -----------
Other investments.................... 518,130 531,116 531,116
----------- ----------- -----------
Short-term investments and cash...... 1,977,853 1,977,853 1,977,853
----------- ----------- -----------
Total investments and cash....... $13,631,969 $13,762,324 $13,762,324
=========== =========== ===========
36
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ACE LIMITED AND SUBSIDIARIES
BALANCE SHEETS (Parent Company Only)
December 31, 2000 and 1999
2000 1999
----------- -----------
(in thousands of U.S.
dollars)
Assets
Investments and cash
Investments in subsidiaries and affiliate on
equity basis..................................... $ 4,975,663 $ 4,438,895
Fixed maturities.................................. 402,491 201,596
Short-term investments............................ 3,247 27,503
Other investments, at cost........................ 27,715 27,850
Cash.............................................. 46,516 15,457
----------- -----------
Total investments and cash...................... 5,455,632 4,711,301
Due from subsidiaries and affiliates, net........... 318,806 201,548
Other assets........................................ 27,404 29,497
----------- -----------
Total assets.................................... $ 5,801,842 $ 4,942,346
=========== ===========
Liabilities
Accounts payable and accrued liabilities............ $ 37,454 $ 42,979
Dividends payable................................... 33,127 23,921
Short-term debt..................................... -- 424,886
----------- -----------
Total liabilities............................... 70,581 491,786
----------- -----------
Mezzanine equity.................................... 311,050 --
----------- -----------
Shareholders' equity
Ordinary Shares..................................... 9,681 9,061
Additional paid-in capital.......................... 2,637,085 2,214,989
Unearned stock grant compensation................... (29,642) (28,908)
Retained earnings................................... 2,733,633 2,321,570
Accumulated other comprehensive income (loss)....... 69,454 (66,152)
----------- -----------
Total shareholders' equity...................... 5,420,211 4,450,560
----------- -----------
Total liabilities, mezzanine equity and
shareholders' equity............................... $ 5,801,842 $ 4,942,346
=========== ===========
37
SCHEDULE II (Cont'd.)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ACE LIMITED AND SUBSIDIARIES
STATEMENTS OF OPERATIONS (Parent Company Only)
For the years ended December 31, 2000 and 1999, the three months ended December
31, 1998,
and the year ended September 30, 1998
Three Months
Year Ended Year Ended Ended Year Ended
December 31, December 31, December 31, September 30,
2000 1999 1998 1998
------------ ------------ ------------ -------------
(in thousands of U.S. dollars)
Revenues
Investment income,
including
intercompany interest
income................. $ 36,841 $ 33,877 $ 2,951 $ (12,514)
Equity in net income of
subsidiaries
and affiliate.......... 575,032 400,623 245,619 616,658
Net realized gains
(losses) on
investments............ (1,623) (9,354) (4) (6)
-------- -------- -------- ---------
610,250 425,146 248,566 604,138
Expenses
Administrative and other
expenses............... (67,268) (60,183) (10,027) (43,987)
-------- -------- -------- ---------
Net income............ $542,982 $364,963 $238,539 $ 560,151
======== ======== ======== =========
38
SCHEDULE II (Cont'd.)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ACE LIMITED AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS (Parent Company Only)
For the years ended December 31, 2000 and 1999, the three months ended December
31, 1998, and the year ended September 30, 1998
Three
Year Ended Year Ended Months Ended Year Ended
December 31, December 31, December 31, September 30,
2000 1999 1998 1998
------------ ------------ ------------- -------------
(in thousands of U.S. Dollars)
Cash flows from
operating activities
Net income............. $ 542,982 $ 364,963 $ 238,539 $ 560,151
Adjustments to
reconcile net income
to net cash provided
by operating
activities
Equity in net income
of subsidiaries and
affiliate............ (575,032) (400,623) (245,619) (616,658)
Net realized gains
(losses) on
investments.......... 1,623 9,354 4 6
Amortization of
premium/discounts on
fixed maturities..... (764) (3,176) -- --
Amounts due to
subsidiaries and
affiliate, net....... (6,914) (113,634) 49,463 (42,585)
Accounts payable and
accrued liabilities.. (5,525) 37,808 (1,606) (33)
Accrued interest on
advances from
affiliate............ (14,831) (15,353) -- (18,250)
Other................. 9,437 (19,430) (10,919) 2,403
--------- ----------- --------- ---------
Net cash flows (used
for) from operating
activities......... (49,024) (140,091) 29,862 (114,966)
--------- ----------- --------- ---------
Cash flow from investing
activities
Purchases of fixed
maturities........... (618,049) (402,079) (305,423) --
Sales of fixed
maturities........... 449,766 467,010 -- --
Other investments..... 135 (6,837) 12,453 (314)
Dividends received
from subsidiaries.... 101,147 966,000 300,000 365,000
Capitalization of
subsidiaries......... (27,103) (1,160,351) -- (856,477)
Advances to
affiliate............ (157,435) (400,000) -- --
Repayment of advances
to (from) affiliate.. 307,435 (20,039) -- --
Intercompany sale of
subsidiaries......... 82,244 -- -- --
--------- ----------- --------- ---------
Net cash from (used
for) investing
activities......... 138,140 (556,296) 7,030 (491,791)
--------- ----------- --------- ---------
Cash flows from
financing activities
Dividends paid on
Ordinary Shares...... (106,459) (77,836) (17,422) (54,389)
Dividends paid on
FELINE PRIDES........ (15,254)
Proceeds from bank
debt................. 289,008 424,886 -- 635,000
Proceeds from exercise
of options for
shares............... 31,335 5,672 1,931 4,243
Repayment of bank
debt................. (713,894) -- -- (385,000)
Proceeds from shares
issued under ESPP.... 1,234 1,151 -- 955
Advances from
affiliates........... 125,000 330,513 -- 504,600
Proceeds from issuance
of FELINE PRIDES..... 311,050 -- -- --
Net proceeds from
issuance of Ordinary
Shares............... 400,320 -- -- 605,899
Loan repayments....... (370,513) -- -- (608,620)
Issuance costs of
FELINE PRIDES........ (9,884) -- -- --
Repurchase of Ordinary
Shares............... -- -- -- (107,644)
--------- ----------- --------- ---------
Net cash (used for)
from financing
activities......... (58,057) 684,386 (15,491) 595,044
--------- ----------- --------- ---------
Net increase
(decrease) in cash... 31,059 (12,001) 21,401 (11,713)
Cash-beginning of
period............... 15,457 27,458 6,057 17,770
--------- ----------- --------- ---------
Cash end of period.... $ 46,516 $ 15,457 $ 27,458 $ 6,057
========= =========== ========= =========
39
SCHEDULE VI
ACE LIMITED AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION CONCERNING PROPERTY/CASUALTY OPERATIONS
Net Losses and Loss
Reserves Expenses Incurred Amortization
Deferred for Unpaid Related to of Deferred Paid
Policy Losses and Net Net ------------------- Policy Losses and Net
Acquisition Loss Unearned Premiums Investment Current Prior Acquisition Loss Premiums
Costs Expenses Premium Earned Income Year Year Costs Expenses Written
----------- ---------- ---------- ---------- ---------- ---------- -------- ------------ ---------- ----------
(in thousands of U.S. dollars)
Dec. 31, 2000... $572,757 $9,330,950 $3,035,288 $4,534,763 $770,855 $2,996,429 $(60,364) $650,741 $3,836,281 $4,879,354
Dec. 31, 1999... $514,425 $8,908,817 $2,428,828 $2,485,737 $493,337 $1,601,278 $ 38,265 $338,076 $2,426,486 $2,495,348
Dec. 31, 1998
(3 months)..... $ 67,502 $2,577,805 $ 705,712 $ 218,007 $ 85,095 $ 126,139 $(14,970) $ 27,812 $ 216,450 $ 154,103
Sept. 30, 1998.. $ 76,445 $2,678,341 $ 773,702 $ 894,303 $324,254 $ 534,021 $(17,129) $105,654 $ 581,175 $ 880,973
40
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ACE Limited
/s/ Christopher Z. Marshall
By: _________________________________
Christopher Z. Marshall
Chief Financial Officer
March 26, 2001
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Brian Duperreault Chairman, Chief Executive March 26, 2001
______________________________________ Officer; Director
Brian Duperreault
/s/ Christopher Z. Marshall Chief Financial Officer March 26, 2001
______________________________________ (Principal Financial
Christopher Z. Marshall Officer)
/s/ Robert A. Blee Chief Accounting Officer March 26, 2001
______________________________________ (Principal Accounting
Robert A. Blee Officer)
/s/ Donald Kramer Vice Chairman; Director March 26, 2001
______________________________________
Donald Kramer
/s/ Michael G. Atieh Director March 26, 2001
______________________________________
Michael G. Atieh
/s/ Bruce L. Crockett Director March 26, 2001
______________________________________
Bruce L. Crockett
/s/ Roberto G. Mendoza Director March 26, 2001
______________________________________
Roberto G. Mendoza
/s/ Meryl D. Hartzband Director March 26, 2001
______________________________________
Meryl D. Hartzband
/s/ Robert M. Hernandez Director March 26, 2001
______________________________________
Robert M. Hernandez
/s/ Peter Menikoff Director March 26, 2001
______________________________________
Peter Menikoff
/s/ Thomas J. Neff Director March 26, 2001
______________________________________
Thomas J. Neff
41
/s/ Glen M. Renfrew Director March 26, 2001
______________________________________
Glen M. Renfrew
/s/ Robert Ripp Director March 26, 2001
______________________________________
Robert Ripp
/s/ Walter A. Scott Director March 26, 2001
______________________________________
Walter A. Scott
/s/ Dermot F. Smurfit Director March 26, 2001
______________________________________
Dermot F. Smurfit
/s/ Robert W. Staley Director March 26, 2001
______________________________________
Robert W. Staley
/s/ Gary M. Stuart Director March 26, 2001
______________________________________
Gary M. Stuart
/s/ Sidney F. Wentz Director March 26, 2001
______________________________________
Sidney F. Wentz
42