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Ace Ltd – ‘10-Q’ for 12/31/97

As of: Friday, 2/13/98 · For: 12/31/97 · Accession #: 902561-98-44 · File #: 1-11778

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 2/13/98  Ace Ltd                           10-Q       12/31/97    4:106K                                   Mayer Brown LLP

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      23    108K 
 2: EX-10.1     Elective Deferred Compensation Plan                   12     46K 
 3: EX-10.2     Approved Uk Stock Option Programme                    13     46K 
 4: EX-27       Financial Data Schedule                                2±     6K

10-Q — Quarterly Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Breast Implant Litigation Exhibits and Reports on Form 8-K Financial Statements: Liquidity and Capital Resources Management's Discussion and Analysis of Results of Operations and Financial Condition Other Information Submission of matters to a vote of security holders
1	1st Page - Filing Submission
2	Item 1. Financial Statements:
11	Management's Discussion and Analysis of Results of Operations and Financial Condition
16	Liquidity and Capital Resources
18	Breast Implant Litigation
20	Item 4. Submission of matters to a vote of security holders
"	Item 5. Other Information
21	Item 6. Exhibits and Reports on Form 8-K

10-Q 1st Page of 23 TOC ↑Top Previous Next ↓Bottom Just 1st
 
UNITED STATES     

SECURITIES AND EXCHANGE COMMISSION    

WASHINGTON, D.C. 20549    

FORM 10-Q     

(X)     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES            
EXCHANGE ACT OF 1934                                            

  For the Quarterly Period Ended December 31, 1997

OR      

( )      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE               
SECURITIES EXCHANGE ACT OF 1934                               

For the Transition Period from ________________ to ________________ 

Commission File No. 1-11778             I.R.S. Employer Identification No. N/A  

ACE LIMITED     
(Incorporated in the Cayman Islands)    
The ACE Building    
30 Woodbourne Avenue    
Hamilton HM 08    
Bermuda     

Telephone 441-295-5200    

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 period 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                    
-------------                  -----------    

The number of registrant's Ordinary Shares ($0.125 par value) outstanding as    
of February 6, 1998 was 54,203,651.                                             

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ACE LIMITED     

INDEX TO FORM 10-Q    

Part I.  FINANCIAL INFORMATION                                                  
                                                                      Page No.

Item 1.  Financial Statements:                                                  

Consolidated Balance Sheets                                   
       December 31, 1997 (Unaudited) and September 30, 1997          3

Consolidated Statements of Operations (Unaudited)             
Three Months Ended December 31, 1997 and                
       December 31, 1996                                             4

Consolidated Statements of Shareholders' Equity (Unaudited)   
       Three Months Ended December 31, 1997 and December 31, 1996    5

Consolidated Statements of Cash Flows (Unaudited)             
       Three Months Ended December 31, 1997 and December 31, 1996    6

    Notes to Interim Consolidated Financial Statements (Unaudited)   7

Item 2.  Management's Discussion and Analysis of Results of Operations          
              and Financial Condition                                 11

Part II.  OTHER INFORMATION                                                     

Item 4.  Submission of matters to a vote of security holders              20    

Item 5.  Other Information                                                20    

Item 6.  Exhibits and Reports on Form 8-K                                 21    

2     

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                                                                [Download Table]

                        ACE LIMITED AND SUBSIDIARIES                            

                        CONSOLIDATED BALANCE SHEETS                             

                                             December 31          September 30  
                                                 1997                  1997     
                                                ------                 ----     
                                               (unaudited)                      
                                               (in thousands of U.S. dollars    
                                              except share and per share data)  

                                                                                
Assets                                                                          
Investments and cash                                                            
  Fixed maturities available for sale,                                          
   at fair value (amortized cost - $2,978,403                                   
   and $3,226,511)                              $ 3,056,831         $ 3,290,336 
  Equity securities, at fair value                                              
    (cost - $509,719 and $502,481)                  605,329             634,970 
  Short-term investments, at fair value                                         
    (amortized cost - $575,807 and $364,552)        576,071             364,432 
  Other investments, at cost                         83,183              78,691 
  Cash                                              123,564             106,336 
                                                    -------             ------- 

      Total investments and cash                  4,444,978           4,474,765 

Goodwill on Tempest acquisition                     195,397             196,667 
Premiums and insurance balances receivable          133,779             135,815 
Accrued investment income                            33,099              40,581 
Deferred acquisition costs                           24,165              27,018 
Prepaid reinsurance premiums                         35,814              22,196 
Other assets                                        131,705             104,504 
                                                    -------             ------- 

       Total assets                             $ 4,998,937         $ 5,001,546 
                                                  =========           ========= 
Liabilities                                                                     

Unpaid losses and loss expenses                 $ 1,858,055         $ 1,869,995 
Unearned premiums                                   369,206             400,689 
Premiums received in advance                         43,307              24,973 
Reinsurance balances payable                         23,459              11,245 
Accounts payable and accrued liabilities             73,002              63,014 
Dividend payable                                     13,356              12,436 
                                                     ------              ------ 

       Total liabilities                          2,380,385           2,382,352 
                                                  ---------           --------- 
Commitments and Contingencies                                                   

Shareholders' equity                                                            
Ordinary Shares ($0.125 par value, 100,000,000                                  
  shares authorized;                                                            
  54,471,452 and 55,293,218 shares issued                                       
   and outstanding)                                   6,809               6,911 
Additional paid-in capital                        1,086,802           1,102,824 
Unearned stock grant compensation                    (4,250)             (1,993)
Net unrealized appreciation on investments          174,302             196,194 
Cumulative translation adjustments                      709                 855 
Retained earnings                                 1,354,180           1,314,403 
                                                  ---------           --------- 

    Total shareholders' equity                    2,618,552           2,619,194 
                                                  ---------           --------- 

    Total liabilities and shareholders' equity  $ 4,998,937         $ 5,001,546 
                                                  =========           ========= 

       See accompanying notes to interim consolidated financial statements      

                                     3                                          

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                        ACE LIMITED AND SUBSIDIARIES                            

                    CONSOLIDATED STATEMENTS OF OPERATIONS                       
            For the Three Months Ended December 31, 1997 and 1996               
                                 (Unaudited)                                    

                                                   1997                 1996    
                                                   ----                 ----    
                                               (in thousands of U.S. dollars    
                                                   except per share data)       

                                                                                
Revenues                                                                        
     Gross premiums written                      $ 170,245           $ 132,512  
     Reinsurance premiums ceded                    (43,268)            (21,898) 
                                                   --------             ------- 

     Net premiums written                          126,977             110,614  
     Change in unearned premiums                    40,844              53,786  
                                                   --------             ------  

     Net premiums earned                           167,821             164,400  
     Net investment income                          58,413              59,738  
     Net realized gains on investments              27,492              41,723  
                                                   --------             ------  
          Total revenues                           253,726             265,861  
                                                   -------             -------  
Expenses                                                                        
     Losses and loss expenses                      109,161             110,150  
     Acquisition costs                              14,201              14,129  
     Administrative expenses                        17,548              15,841  
                                                   --------             ------  
          Total expenses                           140,910             140,120  
                                                   -------             -------  

Net income                                       $ 112,816          $  125,741  
                                                   =======             =======  

Basic earnings per share                            $ 2.06              $ 2.16  
                                                      ====                ====  

Diluted earnings per share                          $ 2.01              $ 2.14  
                                                      ====                ====  

      See accompanying notes to interim consolidated financial statements       

                                       4                                        

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                        ACE LIMITED AND SUBSIDIARIES                            

             CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY                    
          For the Three Months Ended December 31, 1997 and 1996                 
                                 (Unaudited)                                    

                                                     1997               1996    
                                                     ----               ----    
                                                 (in thousands of U.S. dollars) 

                                                                                
Ordinary Shares                                                                 
    Balance -- beginning of period              $     6,911       $     7,271   
    Exercise of stock options                             2                 2   
    Repurchase of shares                               (104)              (32)  
                                                ------------            ------  

          Balance -- end of period                    6,809             7,241   
                                                ------------            -----   
Additional paid-in capital                                                      
     Balance -- beginning of period               1,102,824         1,156,194   
     Exercise of options for Ordinary Shares            424               393   
     Repurchase of Ordinary Shares                  (16,446)           (5,015)  
                                                 ----------             ------  

          Balance -- end of period                1,086,802         1,151,572   
                                                  ---------         ---------   

Unearned stock grant compensation                                               
     Balance -- beginning of period                  (1,993)           (1,299)  
     Stock grants awarded                            (3,123)           (2,626)  
     Amortization                                       866               401   
                                                ------------     -------------  

          Balance -- end of period                   (4,250)           (3,524)  
                                                 -----------      ------------  
Net unrealized appreciation                                                     
 on investments                                                                 
     Balance -- beginning of period                 196,194            61,281   
     Net (depreciation) appreciation during         (21,892)           25,719   
       period                                     ----------           ------   

          Balance -- end of period                  174,302            87,000   
                                                  ----------          -------   
Cumulative translation adjustments                                              
     Balance -- beginning of period                     855               131   
     Net adjustment for period                         (146)             (449)  
                                                 ------------         -------   

          Balance -- end of period                      709              (318)  
                                                 ------------        --------   
Retained earnings                                                               
     Balance -- beginning of period               1,314,403         1,020,700   
     Net income                                     112,816           125,741   
     Dividends declared                             (13,085)          (10,430)  
     Repurchase of Ordinary Shares                  (59,954)           (9,613)  
                                                  ----------           ------   

          Balance -- end of period                1,354,180         1,126,398   
                                                  ---------         ---------   

Total shareholders' equity                      $ 2,618,552       $ 2,368,369   
                                                  =========         =========   

      See accompanying notes to interim consolidated financial statements       

                                           5                                    

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                        ACE LIMITED AND SUBSIDIARIES                            

                   CONSOLIDATED STATEMENTS OF CASH FLOWS                        

           For the Three Months Ended December 31, 1997 and 1996                
                                (Unaudited)                                     

                                                   1997                 1996    
                                                  ------                ----    
                                               (in thousands of U.S. dollars)   

Cash flows from operating activities                                            
Net income                                   $    112,816         $    125,741  
Adjustments to reconcile net income to                                          
  net cash provided by                                                          
Operating activities                                                            
     Unearned premiums                            (31,483)             (43,938) 
     Unpaid losses and loss expenses              (11,940)              34,506  
     Prepaid reinsurance premiums                 (13,618)              (8,848) 
     Net realized gains on investments            (27,492)             (41,723) 
     Amortization of premium/discounts               (867)              (1,595) 
     Deferred acquisition costs                     2,853                3,814  
     Insurance balances receivable                  2,036                  432  
     Premiums received in advance                  18,334               22,720  
     Reinsurance balances payable                  12,214               11,683  
     Accounts payable and accrued liabilities      10,973              (16,384) 
     Other                                        (22,114)                 353  
                                               -----------           ---------- 

Net cash flows from operating activities           51,712               86,761  
                                              -----------               ------  
Cash flows from investing activities                                            
     Purchases of fixed maturities             (1,299,104)          (1,890,148) 
     Purchases of equity securities               (89,533)            (239,903) 
     Sales of fixed maturities                  1,339,664            1,979,112  
     Sales of equity securities                    85,537              141,500  
     Maturities of fixed maturities                13,000                  --   
     Net realized gains on financial                                            
       futures contracts                            8,687               17,688  
     Other investments                             (4,492)                 --   
     Acquisition of subsidiaries, net of cash                                   
       acquired                                       --               (30,416) 
                                              ------------              ------- 

     Net cash from (used in) investing                                          
       activities                                  53,759              (22,167) 
                                               -----------             -------  

Cash flows from financing activities                                            
     Repurchase of Ordinary Shares                (76,504)             (14,658) 
     Proceeds from exercise of options for                                      
       Ordinary Shares                                426                  393  
     Dividends paid                               (12,165)             (10,199) 
                                                ----------              ------- 

     Net cash used for financing activities       (88,243)             (24,464) 
                                               -----------              ------- 

Net increase in cash                               17,228               40,130  

Cash -- beginning of period                        106,336               53,374 
                                                ----------              ------  

Cash -- end of period                        $     123,564        $      93,504 
                                                ==========             ======== 


 See accompanying notes to interim consolidated financial statements

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ACE LIMITED AND SUBSIDIARIES    
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS    
(Unaudited)     

1. General                                                                  

The interim consolidated financial statements, which include the accounts   
of the Company and its subsidiaries, have been prepared on the basis of     
accounting principles generally accepted in the United States of America    
and, in the opinion of management, reflect all adjustments (consisting of   
normal recurring accruals) necessary for a fair presentation of results     
for such periods. The results of operations and cash flows for any          
interim period are not necessarily indicative of results for the full       
year. These financial statements should be read in conjunction with the     
consolidated financial statements, and related notes thereto, included in   
the Company's 1997 Annual Report on Form 10-K.                              

On January 2, 1998, the Company completed the acquisition of Westchester    
Specialty Group, Inc. ("WSG"), through its newly-created U.S. holding       
company, ACE US Holdings, Inc. WSG, through its insurance subsidiaries,     
provides specialty commercial property and umbrella liability coverages     
in the U.S. Under the terms of the agreement, the Company purchased all     
of the outstanding capital stock of WSG for aggregate cash consideration    
of $338 million. In connection with the acquisition, National Indemnity,    
a subsidiary of Berkshire Hathaway, has provided $750 million (75 percent   
quota share of $1 billion) of reinsurance protection to WSG with respect    
to their loss reserves for the 1996 and prior accident years. The Company   
financed the transaction with $250 million of bank debt (see note 7 -       
Credit Facilities) and the remainder with available cash.                   

The acquisition will be recorded using the purchase method of accounting    
and accordingly, the consolidated financial statements will include the     
results of ACE US Holdings, Inc. and its subsidiaries from January 2,       
1998, the date of acquisition.                                              

At December 31, 1997 approximately 70 percent of the Company's written      
premiums came from North America with approximately 18 percent coming       
from the United Kingdom and continental Europe and approximately 12         
percent from other countries.                                               

2. Significant Accounting Policies                                              

Earnings per share                                                          

In 1997, the Financial Accounting Standards Board issued Statement of       
Financial Accounting Standards No. 128, Earnings per Share. Statement 128   
replaced the previously reported primary and fully diluted earnings per     
share with basic and diluted earnings per share. Unlike primary earnings    
per share, basic earnings per share excludes any dilutive effects of        
options, warrants and convertible securities. Diluted earnings per share    
is very similar to the previously reported primary earnings per share       
which included the dilution effect of outstanding options calculated        
using the treasury stock method using an average share price for the        
period. All earnings per share amounts for all periods have been            
presented, and where necessary, restated to conform to the Statement 128    
requirements.                                                               

3. Commitments and Contingencies                                                

A number of the Company's insureds have given notice of claims relating     
to breast implants or components or raw material thereof that had been      
produced and/or sold by such insureds. Lawsuits including class actions,    
involving thousands of implant recipients have been filed in both state     
and federal courts throughout the United States. Most of the federal        
cases have been consolidated pursuant to the rules for Multidistrict        
Litigation to a Federal District Court in Alabama.                          

On May 15, 1995, the Dow Corning Corporation, a significant defendant,      
filed for protection under Chapter 11 of the U.S. Bankruptcy Code and       
claims against Dow Corning remain stayed subject to the Bankruptcy Code.    

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ACE LIMITED AND SUBSIDIARIES      
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)    
(Unaudited)     

3. Commitments and Contingencies (cont'd.)                                  

On October 1, 1995, negotiators for three of the major defendants agreed    
on the essential elements of a revised individual settlement plan for       
U.S. claimants with at least one implant from any of those manufacturers    
("the Settlement"). In general, under the Settlement, the amounts payable   
to individual participants, and the manufacturers' obligations to make      
those payments, would not be affected by the number of claimants electing   
to opt out from the new plan. Also, in general, the compensation would be   
fixed and not affected by the number of participants, and the               
manufacturers would not have a right to walk away because of the amount     
of claims payable. Finally, each settling defendant agreed to be            
responsible only for cases in which its implant was identified, and not     
for a percentage of all claims.                                             

By November 13, 1995, the Settlement was approved by the three major        
defendants. In addition, two other defendants became part of the            
Settlement, although certain of their settlement terms are different and    
more restricted than the plan offered by the original three defendants.     

On December 22, 1995, the multidistrict litigation judge approved the       
Settlement and the materials for giving notice to claimants although an     
appeal concerning the Settlement is pending with the Eleventh Circuit       
Court of Appeals. Beginning in mid-January, 1996, the three major           
defendants have each made payments to a court-established fund for use in   
making payments under the Settlement. The Settlement Claims Office had      
reported that as of October 31, 1997, it has sent out Notification of       
Status Letters to more than 360,000 non-opt-out domestic implant            
recipients who had registered with the Settlement Claims Office. As of      
October 31, 1997, approximately $565 million had been distributed under     
the Settlement to implant recipients of the three major defendants.         
Certain potential payments to claimants relating to other implants remain   
suspended because of the pending appeals. The Settlement Claims Office      
has also reported that approximately 32,500 domestic registrants            
exercised opt-out rights after receiving their status letters.              
Previously, approximately 19,000 other domestic implant recipients had      
exercised opt-out rights in 1994 and/or before receiving status letters.    

At June 30, 1994, the Company increased its then existing reserves          
relating to breast implant claims. Although the reserve increase was        
partially satisfied by an allocation from existing IBNR, it also required   
an increase in the Company's total reserve for unpaid losses and loss       
expenses at June 30, 1994 of $200 million. The increase in reserves was     
based on information made available in conjunction with the lawsuits and    
information made available from the Company's insureds and was predicated   
upon an allocation between coverage provided before and after the end of    
1985 (when the Company commenced underwriting operations). No additional    
reserves relating to breast implant claims have been added since June 30,   
1994.                                                                       

The Company continually evaluates its reserves in light of developing       
information and in light of discussions and negotiations with its           
insureds. During fiscal 1997 and the first quarter of fiscal 1998, the      
Company made payments of approximately $260 million with respect to         
breast implant claims. These payments were included in previous reserves    
and are consistent with the Company's belief that its reserves are          
adequate. Significant uncertainties continue to exist with regard to the    
ultimate outcome and cost of the Settlement and value of the opt-out        
claims. 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 reserves      
for unpaid losses and loss expenses including those arising from breast     
implant claims are adequate as at December 31, 1997.                        

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ACE LIMITED AND SUBSIDIARIES      
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)    
(Unaudited)     

4. Shares Issued and Outstanding                                            

The Board of Directors has authorized the repurchase from time to time of   
the Company's Ordinary Shares in open market and private purchase           
transactions. On May 9, 1997 the Board of Directors terminated the then     
existing share repurchase program and authorized a new share program for    
up to $300 million of the Company's Ordinary Shares. During the quarter     
ended December 31, 1997, the Company repurchased 836,200 Ordinary Shares    
under the share repurchase program for an aggregate cost of $76.5           
million. As at December 31, 1997, approximately $191.2 million of the       
Board authorization had not been utilized.                                  

5. Restricted Stock Awards                                                  

Under the terms of the 1995 Long-Term Incentive Plan 34,500 restricted      
Ordinary Shares were awarded during the current quarter, to officers of     
the Company and its subsidiaries. These shares vest at various dates        
through November 2002.                                                      

6. Earnings Per Share                                                       

The following table sets forth the computation of basic and diluted         
earnings per share.                                                         

                                              December 31,
                                            1997            1996
                                            ----            ----
                                             (in thousands of U.S. dollars
                                              except share and per share data)

Numerator:                                                                    
Net Income                                   $   112,816      $  125,741  
                                           ============     ==========
Denominator:                                                                  
Denominator for basic earnings per share -                                
weighted average shares                       54,883,826      58,139,648  

Effect of dilutive securities                  1,342,994         746,607  
                                           -----------      ----------

Denominator for diluted earnings per                                      
share - adjusted weighted average                                         
shares and assumed conversions                56,226,820      58,886,255  
                                            ==========      ==========

Basic earnings per share                          $ 2.06          $ 2.16  
                                                  ====            ====

Diluted earnings per share                        $ 2.01          $ 2.14  
                                                  ====            ====

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ACE LIMITED AND SUBSIDIARIES    
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)    
(Unaudited)     

7. Credit Facilities                                                        

In December 1997 the Company put in place syndicated credit                 
facilities which replaced the exisiting facilities.  J.P. Morgan            
Securities, Inc. and Mellon Bank N.A. acted as co-arrangers in the          
arranging, structuring and syndication of these credit                      
facilities.  The new facilities provide:                                    

.      A $200 million 364 day revolving credit facility and a $200          
    million five year revolving credit facility which together make up
a combined $400 million committed, unsecured revolving credit 
  facility. This new five year revolving credit facility has a $50
million LOC sublimit.                                         

.      A five year LOC of approximately 154 million pounds ($260 million)   
which is being used to fulfill the requirements of Lloyd's to 
provide funds to support underwriting capacity on Lloyd's     
syndicates in which the Company participates. The minimum     
consolidated tangible net worth covenant for A.C.E. Insurance 
Company, Ltd. under this LOC is $1.0 billion.                 

.      A $250 million seven year Amortized Term Loan Facility which was     
 used on January 2, 1998 to partially finance the acquisition of
WSG. The interest rate on the term loan is LIBOR plus an      
applicable spread.                                            

The revolving credit and term loan facilities require that the Company      
maintain a minimum consolidated tangible net worth of $1.4 billion.         

8. Reclassification                                                         

Certain items in the prior period financial statements have been            
reclassified to conform with the current period presentation.               

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF     
RESULTS OF OPERATIONS AND FINANCIAL CONDITION     

General                                                                     

The following is a discussion of the Company's results of operations,       
financial condition, liquidity and capital resources as of and for the      
three months ended December 31, 1997. The results of operations and cash    
flows for any interim period are not necessarily indicative of results      
for the full year. This discussion should be read in conjunction with the   
consolidated financial statements, related notes thereto and the            
Management's Discussion and Analysis of Results of Operations and           
Financial Condition included in the Company's 1997 Annual Report on Form    
10-K.                                                                       

ACE Limited ("ACE") is a holding company which, through its Bermuda-based   
operating subsidiaries, A.C.E. Insurance Company, Ltd. ("ACE Insurance"),   
Corporate Officers & Directors Assurance Ltd. ("CODA") and Tempest          
Reinsurance Company Limited ("Tempest"), provides insurance and             
reinsurance for a diverse group of international clients. In addition,      
the Company provides funds at Lloyd's to support underwriting by            
syndicates managed by Methuen Underwriting Limited ("MUL"), ACE London      
Aviation Limited ("ALA") and ACE London Underwriting Limited ("ALU"),       
each indirect wholly owned subsidiaries of ACE. The term "the Company"      
refers to ACE and its subsidiaries, excluding MUL, ALA and ALU.             

For the 1996, 1997 and 1998 years of account, the Company, through          
corporate subsidiaries, has or will participate in the underwriting of      
these syndicates by providing funds at Lloyd's, primarily in the form of    
a letter of credit, supporting approximately $37 million, $229 million      
and $485 million, respectively, of underwriting capacity. The syndicates    
managed by these agencies in which the Company participates underwrite      
aviation, marine and non-marine risks. Underwriting capacity is the         
amount of gross premiums that a syndicate at Lloyd's can underwrite in a    
given year of account. However, a syndicate is not required to fully        
utilize all of the capacity and it is not unusual for capacity              
utilization to be significantly lower than 100 percent.                     

On January 2, 1998, the Company completed the acquisition of Westchester    
Specialty Group, Inc. ("WSG"), through its newly-created U.S. holding       
company, ACE US Holdings, Inc. ("ACE US"). WSG, through its insurance       
subsidiaries, provides specialty commercial property and umbrella           
liability coverages in the U.S. Under the terms of the agreement, the       
Company purchased all of the outstanding capital stock of WSG for           
aggregate cash consideration of $338 million. In connection with the        
acquisition, National Indemnity, a subsidiary of Berkshire Hathaway, has    
provided $750 million (75 percent quota share of $1 billion) of             
reinsurance protection to WSG with respect to their loss reserves for the   
1996 and prior accident years (see "Liquidity and Capital Resources").      

The Company will continue to evaluate potential new product lines and       
other opportunities in the insurance and reinsurance markets.               

Results of Operations - Three Months ended December 31, 1997                

Net Income                                                                    

                                     Three Months ended           % Change
                                       December 31                  from
                                       1997           1996          Prior year
                                       -----         ------         ----------
                     (in millions)

Income excluding net realized                                                 
gains on investments                $  85.3         $ 84.0            1.6%  
Net realized gains on investments       27.5           41.7            N.M.   
                                     ----           ----           -----
Net income                           $ 112.8         $125.7            N.M.   
                                    =====          =====            ====

(N.M. -- Not meaningful)                                                      

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF     
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)     

Results of Operations - Three Months ended December 31, 1997                    
(continued)                                                                     

Income excluding net realized gains on investments for the first quarter    
of fiscal 1998 increased by 1.6 percent, compared with the corresponding    
fiscal 1997 quarter. This increase is a result of higher income from        
insurance operations and was partially offset by a decrease in investment   
income and an increase in general and administrative expenses.              

Both net income for the current quarter and the first quarter of fiscal     
1997 benefited from positive movements in the investment markets which      
produced net realized gains on investments in each of these quarters.       

Premiums                                                                      
                                         Three Months ended       % Change
                                            December 31             from
                                          1997            1996      Prior year
                                        -----           ------     ---------
                         (in millions)

Gross premiums written:                                                       
ACE Insurance (including CODA)         $ 127.5          $ 124.7         2.2%  
Lloyd's syndicates                        42.7              6.1         N.M.  
Property catastrophe (Tempest)             __               1.7         N.M.  
                                        -----          -------       -------
                                     $ 170.2          $ 132.5        28.5%
                                        =====            =====       =======

Net premiums written:                                                         
ACE Insurance (including CODA)         $  94.8          $ 105.2         (9.9)%
Lloyd's syndicates                        32.2              3.7          N.M. 
Property catastrophe (Tempest)             __               1.7          N.M. 
                                         -----           -------        ------
                                       $ 127.0          $ 110.6          14.8%
                                         =====            =====         ======

Net premiums earned:                                                          
ACE Insurance (including CODA)         $ 119.6          $ 126.0         (5.1)%
Lloyd's syndicates                        19.8              2.3           N.M.
Property catastrophe (Tempest)            28.4             36.1         (21.1)
                                         ------          ------         ------
                                       $ 167.8          $ 164.4           2.1%
                                         =====            =====         ======

(N.M. -- Not meaningful)                                                

12  

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF     
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)     

Results of Operations - Three Months ended December 31, 1997                
(continued)                                                                 

Despite continuing competitive pressures in most insurance and              
reinsurance markets, gross premiums written increased by 28.5 percent to    
$170.2 million in the quarter ended December 31, 1997 compared with         
$132.5 million in the quarter ended December 31, 1996. This increase is     
primarily a result of the Company's diversification strategy undertaken     
over the past several years. The Company recorded an increase of $36.6      
million in gross premiums written with respect to the Company's             
participation in the Lloyd's syndicates managed by ACE London at Lloyd's.   
This growth, which was achieved despite continuing price competition in     
the Lloyd's market, is a result of the Company's increased participation    
in the syndicates under management. Gross premiums written in ACE           
Insurance increased by 2.2 percent, or $2.8 million, in the quarter         
compared with the comparable quarter last year. This increase was           
primarily the result of growth in satellite premiums, which experienced     
increased activity in both launch and in-orbit programs, offset by          
continuing declines in the directors and officers liability and excess      
liability lines of business. The decline in excess liability is mainly      
the result of non-renewed accounts, premium adjustments and pricing         
changes resulting primarily from increases in attachment points and         
decreases in limits provided. While this has resulted in decreasing         
premiums, it has also led to a reduction in the Company's exposure and an   
improved risk profile. As Tempest renewals primarily fall in January and    
July of each year premium transactions are minimal during the December      
quarter. However, Tempest experienced continuing price pressures on its     
January 1998 renewals with price reductions up to 20 percent in many        
cases.                                                                      

Net premiums written increased by $16.4 million to $127.0 million this      
quarter from $110.6 million in the quarter ended December 31, 1996, an      
increase of 14.8 percent. This increase was the result of increases in      
the Company's participation in the Lloyd's syndicates managed by ACE        
London at Lloyd's. Net premiums written in ACE Insurance declined by 9.9    
percent in the quarter compared to the first quarter of fiscal 1997. The    
decline is primarily the result of continuing declines in directors and     
officers liability and excess liability premiums, offset somewhat by        
growth in premiums from the satellite division. Net premiums written were   
also affected by the increased purchase of reinsurance in several           
divisions in ACE Insurance.                                                 

Net premiums earned were $167.8 million compared to $164.4 million last     
year, an increase of 2.1 percent. This increase was a result of a $17.5     
million increase in net premiums earned from our Lloyd's syndicate          
participation, offset somewhat by declines in earned premiums in ACE        
Insurance and in the property catastrophe business in Tempest.              

Net Investment Income                                                         
                                         Three Months ended         % Change
                                            December 31             from
                                           1997           1996      Prior year
                                           ----           ----      ----------
                           (in millions)

Net investment income                    $ 58.4         $ 59.7         (2.2)% 
                                          ====           ====         ======

Net investment income decreased to $58.4 million in the quarter compared to     
$59.7 million in the quarter ended December 31, 1996. This decrease was         
primarily due to the reduction in average yield on the portfolio caused by      
downward movements in the yield curve as well as the movement from 15           
percent equities to 20 percent equities during December 1996. In addition,      
during fiscal 1997 and the first quarter of fiscal 1998, the investable         
asset base remained relatively constant as cash flows from operations were      
largely offset by share repurchases and dividend payments.                      

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF     
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)     

Results of Operations - Three Months ended December 31, 1997                
(continued)                                                                 

Net Realized Gains on Investment                                              
                                              Three Months ended
                                                  December 31,
                                                 1997                   1996
                                                 -----                  ----
                                                 (in millions)

Fixed maturities and short-term investments     $ 21.4                 $ 21.4 

Equity securities                                  7.3                    4.2 
Financial futures and option contracts             8.7                   17.7 
Currency                                          (9.9)                  (1.6)
                                                  -----                  -----
                                               $ 27.5                 $ 41.7
                                                 =====                  ====

The Company's investment strategy takes a long-term view and the            
portfolio is actively managed to maximize total return within certain       
specific guidelines which minimize risk. The portfolio is reported at       
fair value. The effect of market movements on the investment portfolio      
will directly impact net realized gains (losses) on investments when        
securities are sold. Changes in unrealized gains and losses, which result   
from the revaluation of securities held, are reported as a separate         
component of shareholders' equity.                                          

The Company uses foreign currency forward and option contracts to           
minimize the effect of fluctuating foreign currencies on the value of       
non-U.S. dollar holdings. The contracts used are not designated as          
specific hedges and therefore, realized and unrealized gains and losses     
recognized on these contracts are recorded as a component of net realized   
gains (losses) on investments in the period in which the fluctuations       
occur, together with net foreign currency gains and losses recognized       
when non-U.S. dollar securities are sold.                                   

During the first quarter of fiscal 1998 the fair value of the Company's     
investment portfolio was positively impacted by a general increase in       
prices in the U.S. bond markets resulting from the decline in interest      
rates during the period. The sales proceeds for fixed maturity securities   
were generally higher than their amortized cost during most of the          
quarter which resulted in net realized gains of $21.4 million being         
recognized on fixed maturities and short-term investments.                  

With strong U.S. equity markets, net realized gains on sales of equity      
securities were $7.3 million in the first quarter of fiscal 1998 compared   
with gains of $4.2 million in the first quarter of fiscal 1997.             

In the first quarter of fiscal 1998 the S&P 500 Stock Index rose            
approximately 3 percent and generated net realized gains on the equity      
index futures contracts of $4.4 million. The remainder of the net           
realized gains on financial futures and option contracts in the first       
quarter of fiscal 1998 arose from gains recognized on futures contracts     
used by certain of the Company's external managers of fixed income          
securities. Net realized gains on financial futures contracts of $17.7      
million recorded in the first quarter of fiscal 1997 were primarily         
generated by the equity index futures contracts held as a result of an      
over 8 percent rise in the S&P 500 Stock Index during that quarter.         

14    

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF     
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)     

Results of Operations - Three Months ended December 31, 1997                    
(continued)                                                                     

Combined Ratio                                                                
                                                Three Months ended
                                                 December 31
                                                  1997                  1996
                                                 ------                 ----
                                                   (in millions)

Loss and loss expense ratio                         65.1%                67.0%
Underwriting and administrative expense ratio       18.9                 18.2 
                                                 -------                ----

Combined ratio                                      84.0%                85.2%
                                                   ====                 ====

The underwriting results of a property and casualty insurer are discussed       
frequently by reference to its loss and loss expense ratio, underwriting        
and administrative expense ratio and combined ratio. Each ratio is derived      
by dividing the relevant expense amounts by net premiums earned. The            
combined ratio is the sum of the loss and loss expense ratio and the            
underwriting and the administrative expense ratio. A combined ratio under       
100 percent indicates underwriting profits and a combined ratio exceeding       
100 percent indicates underwriting losses. Property catastrophe reinsurance     
companies generally expect to have overall lower combined ratios as             
compared with other reinsurance companies with long-tail exposures.             
However, property catastrophe loss experience is generally characterized by     
low frequency but high severity short-tail claims which may result in           
significant volatility in results.                                              

Several aspects of the Company's operations, including the low frequency        
and high severity of losses in the high excess layers in certain lines of       
business in which the Company provides insurance and reinsurance,               
complicate the actuarial reserving techniques utilized by the Company.          
Management believes, however, that the Company's reserves for unpaid losses     
and loss expenses, including those arising from breast implant litigation,      
are adequate to cover the ultimate cost of losses and loss expenses             
incurred through December 31, 1997. Since such provisions are necessarily       
based on estimates, future developments may result in ultimate losses and       
loss expenses significantly greater or less than such amounts (see "Breast      
Implant Litigation").                                                           

For the quarter ended December 31, 1997, the loss and loss expense ratio        
decreased to 65.1 percent from 67.0 percent for the first quarter of fiscal     
1997. This decline is partly due to the fact that Tempest had very little       
loss activity in the quarter, posting a loss and loss expense ratio of 1.8      
percent compared to 15.0 percent for the 1997 quarter. The change in mix of     
earned premiums in ACE Insurance has also contributed to the decrease in        
the loss and loss expense ratio during the quarter.                             

Acquisition costs remained relatively flat during the current quarter           
compared to the first quarter of fiscal 1997, despite a continuing change       
in the mix of earned premiums. The additional acquisition costs generated       
primarily by the increase in earned premiums from the Lloyd's                   
participation, were offset by a net decrease in acquisition costs               
resulting from declines in earned premiums from ACE Insurance and               
Tempest. Administrative expenses increased by $1.7 million in the current       
quarter compared to the first quarter of fiscal 1997 due primarily to the       
costs associated with our increased participation in the Lloyd's market.        

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF     
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)     

LIQUIDITY AND CAPITAL RESOURCES                                               

As a holding company, ACE's assets consist primarily of the stock of its    
subsidiaries as well as other investments. In addition to investment        
income, its cash flows currently depend primarily on dividends or other     
statutorily permissible payments from its Bermuda-based operating           
subsidiaries (the "Bermuda subsidiaries"). There are currently no legal     
restrictions on the payment of dividends from retained earnings by the      
Bermuda subsidiaries as the minimum statutory capital and surplus           
requirements are satisfied by the share capital and additional paid-in      
capital of each of the Bermuda subsidiaries. However, the payment of        
dividends or other statutorily permissible distributions by the Bermuda     
subsidiaries is subject to the need to maintain shareholder's equity at a   
level adequate to support the level of insurance and reinsurance            
operations. During December 1997 ACE received a dividend of $115 million    
from Tempest.                                                               

The Company's consolidated sources of funds consist primarily of net        
premiums written, investment income, and proceeds from sales and            
maturities of investments. Funds are used primarily to pay claims,          
operating expenses and dividends and for the purchase of investments and    
for share repurchases.                                                      

For the three months ended December 31, 1997, the Company's consolidated    
net cash flow from operating activities was $51.7 million, compared with    
$86.8 million for the three months ended December 31, 1996. Cash flows      
are affected by claims payments, which due to the nature of the insurance   
and reinsurance coverage provided by the Company, may comprise large loss   
payments on a limited number of claims and can therefore fluctuate          
significantly. The irregular timing of these large loss payments, for       
which the source of cash can be from operations, available credit           
facilities or routine sales of investments, can create significant          
variations in cash flow from operations between periods. For the three      
month periods ended December 31, 1997 and 1996, loss and loss expense       
payments amounted to $120.8 million and $75.1 million respectively. Total   
loss and loss expense payments amounted to $402.1 million, $101.4 million   
and $73.1 million in fiscal years 1997, 1996 and 1995, respectively.        

At December 31, 1997, total investments and cash amounted to                
approximately $4.4 billion, compared to $4.5 billion at September 30,       
1997.                                                                       

The Company's investment portfolio is structured to provide a high          
level of liquidity to meet insurance related or other obligations.  The     
consolidated investment portfolio is externally managed by independent      
professional investment managers and is invested in high quality            
investment grade marketable fixed income and equity securities, the         
majority of which trade in active, liquid markets. The Company believes     
that its cash balances, cash flow from operations, routine sales of         
investments and the liquidity provided by its credit facilities             
(discussed below) are adequate to allow the Company to pay claims within    
the time periods required under its policies.                               

During December 1997,  the Company put in place syndicated credit           
facilities which replaced the existing facilities.  J.P. Morgan             
Securities, Inc. and Mellon Bank N.A. acted as co-arrangers in the          
arranging, structuring and syndication of these credit facilities.  The     
new facilities provide:                                                     
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF     
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)     

LIQUIDITY AND CAPITAL RESOURCES (continued)                                 

.      A $200 million 364 day revolving credit facility and a $200          
    million five year revolving credit facility which together make up
a combined $400 million committed, unsecured revolving credit 
  facility. This new five year revolving credit facility has a $50
million LOC sublimit.                                         

.      A five year LOC of approximately 154 million pounds ($260 million)   
which is being used to fulfill the requirements of Lloyd's to 
provide funds to support underwriting capacity on Lloyd's     
syndicates in which the Company participates. The minimum     
  consolidated tangible net worth covenant for ACE Insurance under
this LOC is $1.0 billion.                                     

.      A $250 million seven year Amortized Term Loan Facility which was     
 used on January 2, 1998 to partially finance the acquisition of
WSG. The interest rate on the term loan is LIBOR plus an      
applicable spread.                                            

The revolving credit and term loan facilities require that the Company      
maintain a minimum consolidated tangible net worth of $1.4 billion.         

On November 13, 1997, the Board of Directors approved a special resolution  
to split each outstanding Ordinary Share of the Company into three Ordinary 
Shares. 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       
Ordinary Shares pursuant to the stock split shall be as of the close of     
business on February 17, 1998.  Certificates representing the additional    
shares of stock will be mailed on March 2, 1998. (see Part II, Item 4       
"Submission of Matters to a Vote of Security Holders").                     

The Board of Directors has authorized the repurchase from time to time of   
the Company's Ordinary Shares in open market and private purchase           
transactions. On May 9, 1997, the Board of Directors terminated the then    
existing share repurchase program and authorized a new program for up to    
$300.0 million of the Company's Ordinary Shares. During the quarter ended   
December 31, 1997, the Company repurchased 836,200 Ordinary Shares under    
the share repurchase program for an aggregate cost of $76.5 million.        
During the period January 1, 1998 through February 6, 1998, the Company     
repurchased an additional 337,500 Ordinary Shares under the share           
repurchase program for an aggregate cost of $31.1 million, leaving          
approximately $160.1 million of the Board authorization not utilized.       

On October 18, 1997 and January 16, 1998, the Company paid quarterly        
dividends of 22 cents and 24 cents per share, respectively to               
shareholders of record on September 30, 1997 and December 13, 1997. On      
February 6, 1998, following approval by the shareholders of the             
three-for-one stock split, the Board of Directors declared a quarterly      
dividend of 8 cents per share payable on April 18, 1998 to shareholders     
of record on March 31, 1998. The declaration and payment of future          
dividends is 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.            

As previously discussed, on January 2, 1998, the Company completed the      
acquisition of WSG, through its newly-created U.S. holding company, ACE     
US, for an aggregate cash consideration of $338 million. ACE US was         
capitalized by ACE Limited with $75 million and received $35 million from   
an inter-company loan. ACE US financed the acquisition of WSG with $250     
million of bank debt (see discussion of syndicated credit facilities        
above) and the remaining $88 million came from available funds.             

Fully diluted net asset value per share was $48.30 at December 31, 1997,    
compared with $47.14 at September 30, 1997.                                 

The Company maintains loss reserves for the estimated unpaid ultimate       
liability for losses and loss expenses under the terms of its policies      
and agreements. The reserve for unpaid losses and loss expenses of $1.8     
billion at December 31, 1997, includes $839 million of case and loss        
expense reserves. While the Company believes that its reserve for unpaid    
losses and loss expenses at December 31, 1997 is adequate, future           
developments may result in ultimate losses and loss expenses                
significantly greater or less than the reserve provided. A number of the    
Company's insureds have given notice of claims relating to breast           
implants or components or raw material thereof that had been produced       
and/or sold by such insureds. During fiscal 1997 and 1998, the Company      
made certain payments to policyholders with respect to these claims.        

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF     
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)     

LIQUIDITY AND CAPITAL RESOURCES (continued)                             

However, the Company does not have adequate data upon which to anticipate   
the timing of future payments relating to these liabilities, and it         
expects that the amount of time required to determine the ultimate          
financial impact of the options selected by claimants may extend well       
into 1998 and beyond (see "Breast Implant Litigation").                     

The Company's financial condition, results of operations and cash flow      
are influenced by both internal and external forces. Claims settlements,    
premium levels and investment returns may be impacted by changing rates     
of inflation and other economic conditions. In many cases, significant      
periods of time, ranging up to several years or more, may elapse between    
the occurrence of an insured loss, the reporting of the loss to the         
Company and the settlement of the Company's liability for that loss. The    
liquidity of its investment portfolio, cash flows and the credit            
facilities are, in management's opinion, adequate to meet the Company's     
expected cash requirements.                                                 

Breast Implant Litigation                                                   

A number of the Company's insureds have given notice of claims relating     
to breast implants or components or raw material thereof that had been      
produced and/or sold by such insureds. Lawsuits, including class actions,   
involving thousands of implant recipients have been filed in both state     
and federal courts throughout the United States. Most of the federal        
cases have been consolidated pursuant to the rules for Multidistrict        
Litigation to a Federal District Court in Alabama, although cases are in    
the process of being transferred back to federal courts or remanded to      
state courts.                                                               

On May 15, 1995, the Dow Corning Corporation, one of the major              
defendants, filed for protection under Chapter 11 of the U.S. Bankruptcy    
Code and claims against Dow Corning remain stayed subject to the            
Bankruptcy Code.                                                            

On October 1, 1995, negotiators for three of the major defendants agreed    
on the essential elements of an individual settlement plan for U.S.         
claimants with at least one implant from any of those manufacturers ("      
the Settlement"). In general, under the Settlement, the amounts payable     
to individual participants, and the manufacturers' obligations to make      
those payments, would not be affected by the number of participants         
electing to opt out from the new plan. Also, in general, the compensation   
would be fixed and not affected by the number of participants, and the      
manufacturers would not have a right to walk away because of the amount     
of claims payable. Finally, each settling defendant agreed to be            
responsible only for cases in which its implant was identified, and not     
for a percentage of all cases. By November 13, 1995, the Settlement was     
approved by the three major defendants. In addition, two other defendants   
became part of the Settlement, although certain of their settlement terms   
are different and more restricted than the plan offered by the original     
three defendants. On December 22, 1995, the multidistrict litigation        
judge approved the Settlement and the materials for giving notice to        
claimants although an appeal concerning the Settlement is pending with      
the Eleventh Circuit Court of Appeals.                                      

Beginning in mid-January, 1996, the three major defendants have each made   
payments to a court-established fund for use in making payments under the   
Settlement. The Settlement Claims Office had reported that as of October    
31, 1997, it has sent out Notification of Status Letters to more than       
360,000 non-opt-out domestic implant recipients who had registered with     
the Settlement Claims Office. As of October 31, 1997, approximately $565    
million had been distributed under the Settlement to implant recipients     
of the three major defendants. Certain potential payments to claimants      
relating to other implants remain suspended because of the pending          
appeals. The Settlement Claims Office has also reported that                
approximately 32,500 domestic registrants exercised opt-out rights after    
receiving their status letters. Previously, approximately 19,000 other      
domestic implant recipients had exercised opt-out rights in 1994 and/or     
before receiving status letters.                                            

Although the Company has underwritten the coverage for a number of the      
defendant companies including four of the companies involved in the         
Settlement, the Company anticipates that insurance coverage issued prior    
to the time the Company issued policies will be available for a portion     
of the defendants' liability. In addition, the Company's policies only      
apply when the underlying liability insurance policies or per occurrence    
retentions are exhausted.                                                   

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF     
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)     

Breast Implant Litigation (continued)                                       

Declaratory judgment lawsuits, involving four of the Company's insureds,    
have been filed seeking guidance on the appropriate trigger for their       
insurance coverage. None of the insureds have named the Company in such     
lawsuits, although other insurers and third parties have sought to          
involve the Company in those lawsuits. To date, one court has stayed a      
lawsuit against the Company by other insurers; two courts have dismissed    
actions by other insurers against the Company. Another court in Texas has   
ruled against the Company's arguments that the court should dismiss the     
claims by other insurers and certain doctors attempting to bring the        
Company into coverage litigation there. On appeal in the Texas lawsuit,     
the appellate court affirmed the lower court's order refusing to dismiss    
the claims against the Company; further appellate review in the Texas       
Supreme Court is pending. In addition, further efforts are contemplated     
to stay or dismiss the doctor's claims against the Company in the Texas     
lawsuit.                                                                    

At June 30, 1994, the Company increased its then existing reserves          
relating to breast implant claims. Although the reserve increase was        
partially satisfied by an allocation from existing IBNR, it also required   
an increase in the Company's total reserve for unpaid losses and loss       
expenses at June 30, 1994 of $200 million. The increase in reserves was     
based on information made available in the pending lawsuits and             
information from the Company's insureds and was predicated upon an          
allocation between coverage provided before and after the end of 1985       
(when the Company commenced underwriting operations). No additional         
reserves relating to breast implant claims have been added since June 30,   
1994.                                                                       

The Company continually evaluates its reserves in light of developing       
information and in light of discussions and negotiations with its           
insureds. During fiscal 1997 and the first quarter of fiscal 1998 the       
Company made payments of approximately $260 million with respect to         
breast implant claims. These payments were included in previous reserves    
and are consistent with the Company's belief that its reserves are          
adequate. Significant uncertainties continue to exist with regard to the    
ultimate outcome and cost of the Settlement and value of the opt-out        
claims. 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 reserves      
for unpaid losses and loss expenses including those arising from breast     
implant claims are adequate as at December 31, 1997.                        

IMPACT OF THE YEAR 2000 ISSUE                                               

Management has initiated a Company wide program to prepare the Company's    
various computer systems and selected applications for the Year 2000. The   
Company has appointed individuals in each business segment to review all    
systems to assess their ability to process transactions in the Year 2000.   
Based on these assessments, the Company has determined that certain         
business segments, particularly ACE USA and ACE London, need to modify or   
replace significant portions of their computer systems so these systems     
will properly utilize dates beyond December 31, 1999. The Company presently 
believes that with these modifications and replacements the Year 2000 Issue 
can be adequately addressed. The Company will utilize both internal and     
external resources to reprogram or replace, and test these systems for Year 
2000 modifications. The Company has initiated communications with its       
significant business partners, including its business partners in the       
Lloyd's markets, to determine the extent to which the Company is vulnerable 
to those third parties' failure to remediate their own Year 2000 Issue. The 
Company is also assessing its exposure to contingencies related to the Year 
2000 Issue for the policies it issues. The total cost of this effort is     
still being evaluated and the Company has not yet determined if the total   
cost will be material.                                                      

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ACE LIMITED     

PART II - OTHER INFORMATION     

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                

1) The Annual General Meeting was held on February 6, 1998.                 

2) The following matters were voted on at the Annual General Meeting:       

a)  The following directors were elected.                       

                         Term Expiring     Votes In Favour    Votes Withheld
                         -------------     ---------------    --------------

Thomas J. Neff                2000         37,816,864          233,441    
Brian Duperreault             2001         37,818,446          231,859    
Robert M. Hernandez           2001         37,817,443          232,862    
Peter Menikoff                2001         37,819,231          261,074    
Glen M. Renfrew               2001         37,812,471          237,834    
Robert Ripp                   2001         37,819,549          230,756    
Dermot F. Smurfit             2001         37,816,974          233,331    

  b)  A resolution was voted on amending the Company's Memorandum of
 Association and Articles of Association to split each outstanding
Ordinary Share of the Company into three Ordinary Shares.       

      The record date for determining those shareholders entitled to
     receive certificates representing additional Ordinary Shares pursuant
   pursuant to the stock split shall be as of the close of business on
   February 17, 1998.  Certificates representing the additional shares
of stock will be mailed on March 2, 1998.                       

       The holders of 37,796,245 shares voted in favour, 21,530 shares
voted against and 232,530 shares abstained.                     

  c)  A special resolution was voted upon to amend Article 33 of the
    Company's Articles to clarify the setting of record dates in respect
of shareholder meetings and payments of dividends.              

       The holders of 37,794,080 shares voted in favour, 13,754 shares
voted against and 242,471 shares abstained.                     

     d)  The appointment of Coopers & Lybrand L.L.P. as independent public
 accountants for the Company for the year ended September 30, 1998
was ratified and approved.                                      

       The holders of 37,794,080 shares voted in favour, 13,754 shares
voted against and 242,471 shares abstained.                     

ITEM 5.  OTHER INFORMATION                                                  

1)  On February 6, 1998, following approval by the shareholders of the      
   three-for-one stock split, the Company declared a dividend of $0.08 per
 Ordinary Share payable on April 18, 1998 to shareholders of record on
March 31, 1998.                                                     

20  

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ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                   

1)  Exhibits                                                                
--------                                                            

10.1   ACE Limited Elective Deferred Compensation Plan                

10.2   ACE Limited Rules of the Approved UK Stock Option Program      

27   Financial Data Schedule                                      

2)  Reports on Form 8-K                                                     

The Company filed a Form-8K current report dated January 23, 1998           
pertaining to the completion of the acquisition of Westchester Specialty    
Group, Inc.                                                                 

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SIGNATURES      

Pursuant to the requirements 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
                                     ---------------------------------

February 13, 1998                              /s/  Brian Duperreault         
                                            ----------------------------
                                           Brian Duperreault
                                             Chairman, President and Chief
                                           Executive Officer

February 13, 1998                               /s/ Christopher Z. Marshall   
                                              ----------------------------
                                           Christopher Z. Marshall
                                           Chief Financial Officer

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EXHIBIT INDEX   

Exhibit                                                                         
Number           Description                          Numbered Page             
-------          ------------                         --------------            

10.1             ACE Limited Elective Deferred                                  
Compensation Plan                             

10.2             ACE Limited Rules of the Approved                              
UK Stock Option Programme                     

27               Financial Data Schedule

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-Q’ Filing	Date	First	Last	Other Filings

	12/31/99	19		10-K, 4, 5, 5/A
	9/30/98	20		10-K, 10-K/A, 5, 5/A
	4/18/98	17	20
	3/31/98	17	20	10-Q, 8-K
	3/2/98	17	20
	2/17/98	17	20
Filed on:	2/13/98	22		S-8, SC 13G/A
	2/6/98	1	20	DEF 14A, PRE 14A
	1/23/98	21		8-K
	1/16/98	17
	1/2/98	7	17	8-K, 8-K/A
	1/1/98	17
For Period End:	12/31/97	1	19
	12/13/97	17
	11/13/97	17
	10/31/97	8	18
	10/18/97	17
	9/30/97	16	17	10-K, DEF 14A
	5/9/97	9	17
	12/31/96	4	16	10-Q
	12/22/95	8	18
	11/13/95	8	18
	10/1/95	8	18
	5/15/95	7	18
	6/30/94	8	19
				List all Filings

3 Subsequent Filings that Reference this Filing

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 2/24/23  Chubb Ltd.                        10-K       12/31/22  168:49M
 2/24/22  Chubb Ltd.                        10-K       12/31/21  162:46M
 2/25/21  Chubb Ltd.                        10-K       12/31/20  166:50M

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Filing Submission 0000902561-98-000044 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Ace Ltd – ‘10-Q’ for 12/31/97

As of: Friday, 2/13/98 · For: 12/31/97 · Accession #: 902561-98-44 · File #: 1-11778

Quarterly Report — Form 10-QFiling Table of Contents

10-Q — Quarterly ReportDocument Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

3 Subsequent Filings that Reference this Filing

Quarterly Report — Form 10-Q
Filing Table of Contents

10-Q — Quarterly Report
Document Table of Contents