Correction on ACE Limited Preliminary Q3 Earnings

October 16, 2008

An October 13, 2008 Insurance Journal story reporting on estimates of third quarter results announced by ACE Limited out of Zurich contained an editing error that produced inaccuracies, particularly surrounding the description of certain losses. Below is a newly edited version of ACE’s announcement. Insurance Journal regrets the error.

Evan G. Greenberg, chairman and chief executive officer of ACE Limited, announced estimates of third quarter results, which he said were “quite good” and put ACE in a good position to “take advantage of weaknesses and opportunities within our industry as they emerge.”

ACE estimates operating income for the third quarter ended Sept. 30, 2008, to be between $1.44 and $1.48 per common share. The company will report net realized and unrealized investment losses of approximately $1.5 billion and expects a decrease in book value per share of 7.5 percent year-to-date.

Following these results, ACE said its capital position remains firmly in the range of the capital required by all principal rating agencies for its ratings.

As disclosed previously, the company did not and does not invest in CDOs (collateralized debt obligations), CLOs (collateralized loan obligations) or complex credit structures and does not employ leverage, and as such, has no transactions that require the posting of collateral.

ACE said its fixed income portfolio is conservatively constructed, has an average credit quality of AA, is well diversified and has an average duration of approximately four years. Of the estimated $1.5 billion in realized and unrealized losses, approximately $1.3 billion relates to the fixed income and equity portfolios and is largely due to the widening of credit spreads in our high quality corporate bond portfolio.

Approximately $220 million of the company’s estimated net realized losses for the third quarter relate to the guaranteed minimum income benefit (GMIB) liabilities of the company’s variable annuity reinsurance book. These losses resulted from an increase in the fair market value of the liabilities related to these annuities. This does not present any liquidity exposures. Cash flow in this business is positive and is within our original expectations.

As of Sept. 30, 2008, ACE said it has entered into securities lending agreements approximating $2 billion. The proceeds from these agreements are invested in prime short-term money market funds. ACE does not issue commercial paper or any other short-term securities to finance its operations.

The company expects operating cash flow to be in the range of $800 million to $1 billion for the third quarter.

The company will issue its third quarter earnings release and financial supplement as scheduled after the market closes on Tuesday, October 28, 2008.

Source: ACE Limited

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