Share-based compensation

9 Months Ended

Sep. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-based compensation

Share-based compensation

The ACE Limited 2004 Long-Term Incentive Plan (the 2004 LTIP) provides for grants of both incentive and non-qualified stock options principally at an option price per share equal to the fair value of ACE’s Common Shares on the date of grant. Stock options are generally granted with a 3-year vesting period and a 10-year term. The stock options vest in equal annual installments over the respective vesting period, which is also the requisite service period. On February 28, 2013, ACE granted 1,815,896 stock options with a weighted-average grant date fair value of $17.29 each. The fair value of the options issued is estimated on the date of grant using the Black-Scholes option pricing model.

The 2004 LTIP also provides for grants of restricted stock and restricted stock units. ACE generally grants restricted stock and restricted stock units with a 4-year vesting period, based on a graded vesting schedule. The restricted stock is granted at market close price on the day of grant. On February 28, 2013, ACE granted 1,345,850 restricted stock awards and 266,065 restricted stock units to employees and officers of ACE and its subsidiaries with a grant date fair value of $85.39 each. Each restricted stock unit represents our obligation to deliver to the holder one Common Share upon vesting.

In May 2013, our shareholders approved an increase of 8 million shares authorized to be issued under the 2004 LTIP, bringing the total shares authorized to 38,600,000 common shares. At September 30, 2013, a total of 11,165,235 shares remain available for future issuance under the 2004 LTIP.