Segment information

9 Months Ended

Sep. 30, 2012

Segment information

Segment information

ACE operates through the following business segments: Insurance – North American, Insurance – Overseas General, Global Reinsurance, and Life. These segments distribute their products through various forms of brokers,agencies, and direct marketing programs. All business segments have established relationships with reinsurance intermediaries.

For segment reporting purposes, certain items have been presented in a different manner than in the consolidated financial statements. Management uses underwriting income as the main measure of segment performance. ACE calculates underwriting income by subtracting Losses and loss expenses, Policy benefits, Policy acquisition costs, and Administrative expenses from Net premiums earned. For the Life business, management also includes Net investment income and (Gains) losses from fair value changes in separate account assets that do not qualify for separate account reporting as components of underwriting income. For example, for the three months ended September 30, 2012, Life underwriting income of $102 million includes Net investment income of $63 million and (Gains) losses from fair value changes in separate account assets of $(14) million.

Effective January 1, 2012, we reclassified prior year segment operating results in order to conform to certain organizational realignments. These realignments resulted in a transfer of operating revenue and underwriting results of our international direct-marketed and credit life businesses from the Insurance – Overseas General segment to the Life segment. These realignments have no impact on consolidated operating results; however, prior year amounts contained in these consolidated financial statements have been adjusted to conform to the current year presentation.

The following tables present the operations by segment:

Statement of Operations by Segment

For the Three Months Ended September 30, 2012

(in millions of U.S. dollars)

	Insurance – North American			Insurance – Overseas General			Global Reinsurance			Life			Corporate and Other			ACE Consolidated
Net premiums written	$	2,537		$	1,384		$	307		$	488		$	—		$	4,716
Net premiums earned	2,472			1,432			281			480			—			4,665
Losses and loss expenses	2,110			622			151			164			—			3,047
Policy benefits	—			—			—			130			—			130
Policy acquisition costs	160			329			40			80			—			609
Administrative expenses	148			234			13			81			43			519
Underwriting income (loss)	54			247			77			25			(43		)	360
Net investment income	263			127			72			63			8			533
Net realized gains (losses) including OTTI	(1		)	13			(2		)	(71		)	1			(60		)
Interest expense	3			2			1			3			54			63
Other (income) expense:
(Gains) losses from fair value changes in separate account assets	—			—			—			(14		)	—			(14		)
Other	(5		)	(3		)	(5		)	—			10			(3		)
Income tax expense (benefit)	81			77			11			14			(36		)	147
Net income (loss)	$	237		$	311		$	140		$	14		$	(62	)	$	640

Statement of Operations by Segment

For the Three Months Ended September 30, 2011

(in millions of U.S. dollars)

	Insurance – North American			Insurance – Overseas General		Global Reinsurance			Life			Corporate and Other			ACE Consolidated
Net premiums written	$	2,207		$	1,398	$	250		$	488		$	—		$	4,343
Net premiums earned	2,299			1,471		240			480			—			4,490
Losses and loss expenses	1,838			671		94			142			—			2,745
Policy benefits	—			—		—			83			—			83
Policy acquisition costs	174			353		50			92			—			669
Administrative expenses	153			236		12			81			38			520
Underwriting income (loss)	134			211		84			82			(38		)	473
Net investment income	291			138		70			60			5			564
Net realized gains (losses) including OTTI	(2		)	1		(29		)	(732		)	2			(760		)
Interest expense	4			2		—			3			53			62
Other (income) expense
(Gains) losses from fair value changes in separate account assets	—			—		—			39			—			39
Other	21			10		7			10			2			50
Income tax expense (benefit)	120			56		7			13			(31		)	165
Net income (loss)	$	278		$	282	$	111		$	(655	)	$	(55	)	$	(39	)

Statement of Operations by Segment

For the Nine Months Ended September 30, 2012

(in millions of U.S. dollars)

	Insurance – North American		Insurance – Overseas General		Global Reinsurance			Life			Corporate and Other			ACE Consolidated
Net premiums written	$	5,690	$	4,387	$	879		$	1,462		$	—		$	12,418
Net premiums earned	5,411		4,243		748			1,427			—			11,829
Losses and loss expenses	4,122		2,030		355			463			—			6,970
Policy benefits	—		—		—			379			—			379
Policy acquisition costs	444		996		125			244			1			1,810
Administrative expenses	448		696		38			237			124			1,543
Underwriting income (loss)	397		521		230			104			(125		)	1,127
Net investment income	808		386		213			186			21			1,614
Net realized gains (losses) including OTTI	16		59		(6		)	(261		)	(2		)	(194		)
Interest expense	9		4		3			9			162			187
Other (income) expense:
(Gains) losses from fair value changes in separate account assets	—		—		—			(18		)	—			(18		)
Other	4		3		(7		)	14			18			32
Income tax expense (benefit)	279		166		17			44			(101		)	405
Net income (loss)	$	929	$	793	$	424		$	(20	)	$	(185	)	$	1,941

Statement of Operations by Segment

For the Nine Months Ended September 30, 2011

(in millions of U.S. dollars)

	Insurance – North American		Insurance – Overseas General			Global Reinsurance			Life			Corporate and Other			ACE Consolidated
Net premiums written	$	5,227	$	4,251		$	847		$	1,417		$	—		$	11,742
Net premiums earned	5,249		4,164			754			1,389			—			11,556
Losses and loss expenses	4,065		2,244			485			439			1			7,234
Policy benefits	—		—			—			282			—			282
Policy acquisition costs	455		989			143			253			—			1,840
Administrative expenses	448		698			38			233			120			1,537
Underwriting income (loss)	281		233			88			182			(121		)	663
Net investment income	886		406			213			166			6			1,677
Net realized gains (losses) including OTTI	8		(18		)	(56		)	(813		)	1			(878		)
Interest expense	11		4			1			9			162			187
Other (income) expense
(Gains) losses from fair value changes in separate account assets	—		—			—			39			—			39
Other	8		3			2			27			9			49
Income tax expense (benefit)	304		112			25			41			(100		)	382
Net income (loss)	$	852	$	502		$	217		$	(581	)	$	(185	)	$	805

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

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

	Property & All Other		Casualty		Life, Accident & Health		ACE Consolidated
	(in millions of U.S. dollars)
For the Three Months Ended September 30, 2012
Insurance – North American	$	1,519	$	860	$	93	$	2,472
Insurance – Overseas General	547		356		529		1,432
Global Reinsurance	131		150		—		281
Life	—		—		480		480
	$	2,197	$	1,366	$	1,102	$	4,665
For the Three Months Ended September 30, 2011
Insurance – North American	$	1,395	$	815	$	89	$	2,299
Insurance – Overseas General	553		366		552		1,471
Global Reinsurance	118		122		—		240
Life	—		—		480		480
	$	2,066	$	1,303	$	1,121	$	4,490

	Property & All Other		Casualty		Life, Accident & Health		ACE Consolidated
	(in millions of U.S. dollars)
For the Nine Months Ended September 30, 2012
Insurance – North American	$	2,631	$	2,505	$	275	$	5,411
Insurance – Overseas General	1,637		1,027		1,579		4,243
Global Reinsurance	355		393		—		748
Life	—		—		1,427		1,427
	$	4,623	$	3,925	$	3,281	$	11,829
For the Nine Months Ended September 30, 2011
Insurance – North American	$	2,413	$	2,570	$	266	$	5,249
Insurance – Overseas General	1,517		1,056		1,591		4,164
Global Reinsurance	345		409		—		754
Life	—		—		1,389		1,389
	$	4,275	$	4,035	$	3,246	$	11,556