10-Q

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 September 30, 2004

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. 98-0091805

ACE LIMITED

(Incorporated in the Cayman Islands)

ACE Global Headquarters

17 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 þ    NO ¨

Indicate by check mark whether registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

YES þ    NO ¨

The number of registrant’s Ordinary Shares ($0.041666667 par value) outstanding as of November 4, 2004 was 284,197,671.

1

ACE LIMITED

INDEX TO FORM 10-Q

		Page No.
Part I. FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Consolidated Balance Sheets September 30, 2004 (Unaudited) and December 31, 2003	3
	Consolidated Statements of Operations (Unaudited) Three and Nine Months Ended September 30, 2004 and 2003	4
	Consolidated Statements of Shareholders’ Equity (Unaudited) Nine Months Ended September 30, 2004 and 2003	5
	Consolidated Statements of Comprehensive Income (Unaudited) Three and Nine Months Ended September 30, 2004 and 2003	7
	Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 2004 and 2003	8
	Notes to Interim Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	65
Item 4.	Controls and Procedures	65
Part II. OTHER INFORMATION
Item 1.	Legal Proceedings	67
Item 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities	67
Item 5.	Other Information	67
Item 6.	Exhibits	68

2

ACE LIMITED

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

ACE LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	September 30 2004			December 31 2003
	(Unaudited)
	(in thousands of U.S. dollars, except share and per share data)
Assets
Investments
Fixed maturities, at fair value (amortized cost - $20,325,522 and $18,006,405)	$	20,790,897		$	18,645,267
Equity securities, at fair value (cost - $849,252 and $401,237)		959,820			543,811
Securities on loan, at fair value (amortized cost/cost - $1,000,411 and $650,160)		1,044,454			684,629
Short-term investments, at fair value		3,359,992			2,927,407
Other investments (cost - $1,158,658 and $602,176)		1,228,384			645,085
Total investments		27,383,547			23,446,199
Cash		625,799			561,650
Accrued investment income		283,525			258,379
Insurance and reinsurance balances receivable		3,378,925			2,836,616
Accounts and notes receivable		169,737			191,519
Reinsurance recoverable		14,268,455			14,080,716
Deferred policy acquisition costs		975,273			1,004,753
Prepaid reinsurance premiums		1,652,597			1,372,568
Funds withheld		328,283			255,587
Value of reinsurance business assumed		291,206			346,365
Goodwill		2,612,449			2,710,830
Deferred tax assets		1,015,576			1,089,805
Other assets		1,470,311			1,397,806
Total assets	$	54,455,683		$	49,552,793
Liabilities
Unpaid losses and loss expenses	$	29,603,310		$	27,154,838
Unearned premiums		6,465,590			6,050,788
Future policy benefits for life and annuity contracts		520,638			491,837
Funds withheld		185,410			208,728
Insurance and reinsurance balances payable		2,273,284			1,902,622
Contract holder deposit funds		220,303			212,335
Securities lending collateral		1,068,056			698,587
Payable for securities purchased		879,249			369,105
Accounts payable, accrued expenses and other liabilities		1,293,735			1,206,046
Dividends payable		59,667			53,182
Short-term debt		145,648			545,727
Long-term debt		1,848,847			1,349,202
Trust preferred securities		412,373			475,000
Total liabilities		44,976,110			40,717,997
Commitments and contingencies
Shareholders’ equity
Preferred Shares ($1.00 par value, 2,300,000 shares authorized, issued and outstanding)		2,300			2,300
Ordinary Shares ($0.041666667 par value, 500,000,000 shares authorized; 284,112,866 and 279,897,193 shares issued and outstanding)		11,838			11,662
Additional paid-in capital		4,895,662			4,765,355
Unearned stock grant compensation		(69,316	)		(44,912	)
Retained earnings		4,031,251			3,380,619
Deferred compensation obligation		12,601			16,687
Accumulated other comprehensive income		607,838			719,772
Ordinary Shares issued to employee trust		(12,601	)		(16,687	)
Total shareholders’ equity		9,479,573			8,834,796
Total liabilities and shareholders’ equity	$	54,455,683		$	49,552,793

See accompanying notes to the interim consolidated financial statements

3

ACE LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the three and nine months ended September 30, 2004 and 2003

(Unaudited)

	Three Months Ended September 30						Nine Months Ended September 30
	2004			2003			2004			2003
	(in thousands of U.S. dollars, except per share data)
Revenues
Gross premiums written	$	3,981,802		$	3,450,912		$	12,438,134		$	10,968,594
Reinsurance premiums ceded		(1,213,252	)		(1,144,781	)		(3,564,487	)		(3,326,418	)
Net premiums written		2,768,550			2,306,131			8,873,647			7,642,176
Change in unearned premiums		84,734			91,394			(632,008	)		(866,527	)
Net premiums earned		2,853,284			2,397,525			8,241,639			6,775,649
Net investment income		251,396			214,689			726,376			633,048
Net realized gains (losses)		(32,092	)		57,556			67,371			124,028
Total revenues		3,072,588			2,669,770			9,035,386			7,532,725
Expenses
Losses and loss expenses		2,234,047			1,518,478			5,500,920			4,260,690
Life and annuity benefits		48,447			44,524			134,569			136,582
Policy acquisition costs		386,082			344,066			1,146,771			973,242
Administrative expenses		325,629			293,355			950,331			840,315
Interest expense		48,997			44,348			139,668			132,958
Other (income) expense		(21,152	)		3,088			1,831			8,516
Total expenses		3,022,050			2,247,859			7,874,090			6,352,303
Income before income tax		50,538			421,911			1,161,296			1,180,422
Income tax expense		53,158			66,946			304,082			207,545
Net income (loss)	$	(2,620	)	$	354,965		$	857,214		$	972,877
Basic earnings (loss) per share	$	(0.05	)	$	1.25		$	2.94		$	3.53
Diluted earnings (loss) per share	$	(0.05	)	$	1.22		$	2.88		$	3.46

See accompanying notes to the interim consolidated financial statements

4

ACE LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the nine months ended September 30, 2004 and 2003

(Unaudited)

	2004			2003
	(in thousands of U.S. dollars)
Preferred Shares
Balance – beginning of period	$	2,300		$	—
Shares issued		—			2,300
Balance – end of period		2,300			2,300
Ordinary Shares
Balance – beginning of period		11,662			10,945
Shares issued		66			563
Exercise of stock options		131			110
Issued under Employee Stock Purchase Plan (ESPP)		10			12
Cancellation of shares		(31	)		(27	)
Balance – end of period		11,838			11,603
Additional paid-in capital
Balance – beginning of period		4,765,355			3,781,112
Ordinary Shares issued		69,050			47,628
Exercise of stock options		73,301			36,394
Ordinary Shares issued under ESPP		7,663			7,332
Cancellation of Ordinary Shares		(28,591	)		(21,320	)
Other		8,884			11,109
Preferred Shares issued, net		—			554,587
Conversion of Mezzanine equity, net		—			310,465
Balance – end of period		4,895,662			4,727,307
Unearned stock grant compensation
Balance – beginning of period		(44,912	)		(42,576	)
Stock grants awarded		(69,876	)		(47,112	)
Stock grants forfeited		15,118			3,687
Amortization		30,354			21,942
Balance – end of period		(69,316	)		(64,059	)
Retained earnings
Balance – beginning of period		3,380,619			2,199,313
Net income		857,214			972,877
Dividends declared on Ordinary Shares		(172,944	)		(150,650	)
Dividends declared on Preferred Shares		(33,638	)		(11,337	)
Dividends declared on Mezzanine equity		—			(9,773	)
Balance – end of period		4,031,251			3,000,430
Deferred compensation obligation
Balance – beginning of period		16,687			18,631
(Decrease) increase to obligation		(4,086	)		336
Balance – end of period	$	12,601		$	18,967

See accompanying notes to the interim consolidated financial statements

5

ACE LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (cont’d)

For the nine months ended September 30, 2004 and 2003

(Unaudited)

	2004			2003
	(in thousands of U.S. dollars)
Accumulated other comprehensive income
Net unrealized appreciation (depreciation) on investments
Balance – beginning of period	$	684,267		$	476,411
Change in period, net of income tax		(122,901	)		211,335
Balance – end of period		561,366			687,746
Minimum pension liability
Balance – beginning of period		(35,684	)		—
Change in period, net of income tax		1,018			(40,054	)
Balance – end of period		(34,666	)		(40,054	)
Cumulative translation adjustment
Balance – beginning of period		71,189			(36,519	)
Change in period, net of income tax		9,949			57,202
Balance – end of period		81,138			20,683
Accumulated other comprehensive income		607,838			668,375
Ordinary Shares issued to employee trust
Balance – beginning of period		(16,687	)		(18,631	)
Decrease (increase) in Ordinary Shares		4,086			(336	)
Balance – end of period		(12,601	)		(18,967	)
Total shareholders’ equity	$	9,479,573		$	8,345,956

See accompanying notes to the interim consolidated financial statements

6

ACE LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three and nine months ended September 30, 2004 and 2003

(Unaudited)

	Three Months Ended September 30						Nine Months Ended September 30
	2004			2003			2004			2003
	(in thousands of U.S. dollars)
Net income (loss)	$	(2,620	)	$	354,965		$	857,214		$	972,877
Other comprehensive income
Net unrealized appreciation (depreciation) on investments
Unrealized appreciation (depreciation) on investments		393,488			(165,252	)		6,844			300,900
Reclassification adjustment for net realized (gains) losses included in net income		(31,929	)		(23,482	)		(175,946	)		(61,088	)
		361,559			(188,734	)		(169,102	)		239,812
Cumulative translation adjustment		21,193			(2,252	)		(488	)		81,594
Minimum pension liability		2,234			(3,081	)		1,605			(62,081	)
Other comprehensive income (loss), before income tax		384,986			(194,067	)		(167,985	)		259,325
Income tax benefit (expense) related to other comprehensive income items		(82,686	)		49,803			56,051			(30,842	)
Other comprehensive income (loss)		302,300			(144,264	)		(111,934	)		228,483
Comprehensive income	$	299,680		$	210,701		$	745,280		$	1,201,360

See accompanying notes to the interim consolidated financial statements

7

ACE LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2004 and 2003

(Unaudited)

	2004			2003
	(in thousands of U.S. dollars)
Cash flows from operating activities
Net income	$	857,214		$	972,877
Adjustments to reconcile net income to net cash flows from (used for) operating activities:
Net realized (gains) losses		(67,371	)		(124,028	)
Amortization of premium/discounts on fixed maturities		80,428			66,554
Deferred income taxes		159,096			157,451
Unpaid losses and loss expenses		2,963,498			1,205,295
Unearned premiums		954,628			532,220
Future policy benefits for life and annuity contracts		28,801			37,027
Insurance and reinsurance balances payable		401,083			(177,348	)
Accounts payable, accrued expenses and other liabilities		81,829			(134,845	)
Insurance and reinsurance balances receivable		(581,646	)		(84,468	)
Reinsurance recoverable		(310,348	)		(40,955	)
Deferred policy acquisition costs		(154,140	)		(139,155	)
Prepaid reinsurance premiums		(302,429	)		383,815
Funds withheld, net		(87,899	)		27,656
Value of reinsurance business assumed		43,752			21,939
Other		11,448			(84,091	)
Net cash flows from operating activities	$	4,077,944		$	2,619,944
Cash flows from investing activities
Purchases of fixed maturities	$	(18,278,983	)	$	(14,490,369	)
Purchases of equity securities		(838,088	)		(75,464	)
Sales of fixed maturities		13,908,365			11,099,741
Sales of equity securities		439,597			107,873
Maturities of fixed maturities		—			94,612
Net proceeds from the settlement of investment derivatives		13,912			18,502
Sale of subsidiary (net of cash sold of $82 million)		953,164			—
Other		(136,733	)		(60,469	)
Net cash flows used for investing activities	$	(3,938,766	)	$	(3,305,574	)
Cash flows from financing activities
Dividends paid on Ordinary Shares	$	(166,459	)	$	(145,462	)
Dividends paid on Preferred Shares		(33,638	)		(11,337	)
Proceeds from issuance of long-term debt		499,565			—
Proceeds from exercise of options for Ordinary Shares		73,432			36,504
Proceeds from Ordinary Shares issued under ESPP		7,673			7,344
Net proceeds from (repayment of) short-term debt		(400,079	)		40
Repayment of trust preferred securities		(75,000	)		—
Net proceeds from issuance of Preferred Shares		—			556,887
Dividends paid on Mezzanine Equity		—			(9,773	)
Net cash flows from (used for) financing activities	$	(94,506	)	$	434,203
Effect of foreign currency rate changes on cash and cash equivalents	$	19,477		$	19,193
Net increase (decrease) in cash		64,149			(232,234	)
Cash – beginning of period		561,650			663,355
Cash – end of period	$	625,799		$	431,121

See accompanying notes to the interim consolidated financial statements

8

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. General

The interim unaudited consolidated financial statements, which include the accounts of the Company and its subsidiaries, have been prepared in accordance with accounting principles generally accepted in the United States of America and, in the opinion of management, reflect all adjustments (consisting of normally 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 Annual Report on Form 10-K for the year ended December 31, 2003.

ACE Limited (ACE or the Company) is a holding company incorporated with limited liability under the Cayman Islands Companies Law and maintains its business office in Bermuda. The Company, through its various subsidiaries, provides a broad range of insurance and reinsurance products to insureds worldwide. ACE operates through four business segments: Insurance – North American, Insurance – Overseas General, Global Reinsurance and Financial Services. These segments are described in Note 18.

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

The following table summarizes the Company’s gross premiums written by geographic region for the nine months ended September 30, 2004 and 2003. Allocations have been made on the basis of location of risk.

Nine Months Ended	North America	Europe	Australia & New Zealand	Asia Pacific	Latin America
September 30, 2004	64%	22%	3%	7%	4%
September 30, 2003	64%	22%	3%	7%	4%

2. New accounting pronouncements

Statement of Position 03-1, “Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts” (SOP 03-1) became effective on January 1, 2004 and provides guidance on accounting and reporting by insurance enterprises for certain nontraditional long-duration contracts and for separate accounts. Through the Global Reinsurance segment, the Company reinsures annuitization benefits, principally related to guaranteed minimum death benefits (GMDBs) and guaranteed minimum income benefits (GMIBs). The valuation of insurance liabilities related to the Company’s GMDB reinsurance product is subject to certain provisions of the SOP whereas the Company’s GMIB reinsurance product meets the definition of a derivative for accounting purposes and is therefore carried at fair value with changes in fair value recognized in income in the period of the change pursuant to the Financial Accounting Standards Board’s (FASB) Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (FAS 133). Pursuant to SOP 03-1, liabilities for annuitization benefits, such as the minimum death benefit guarantee, are generally based on cumulative assessments or premiums to date multiplied by a benefit ratio that is determined by estimating the expected value of benefit payments and related adjustment expenses divided by the present value of cumulative assessment or expected fees during the annuitization period. In the event the Company was to anticipate an ultimate loss on the business over the in-force period of the underlying annuities, an additional liability would be established to recognize such losses. The Company adopted SOP 03-1 on January 1, 2004. In its capacity as reinsurer, the Company’s valuation of insurance liabilities related to its GMDB reinsurance program has been materially consistent with the requirements of the SOP. Consequently, the adoption of SOP 03-1 did not have a material impact on the Company’s consolidated financial statements. See Note 8b for further details regarding the Company’s reinsurance programs involving minimum benefit guarantees under annuity contracts.

In December 2003, the FASB revised its Statement of Financial Accounting Standards No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits” (FAS 132), to require additional disclosures related to pensions and postretirement benefits. While retaining the existing disclosure requirements for pensions and postretirement benefits, additional disclosures are required related to pension plan assets, obligations, contributions and net benefit costs, beginning with fiscal years ending after December 15, 2003. For foreign plans, these additional disclosures are required beginning with fiscal years ending after June 15, 2004. Additional disclosures pertaining to benefit payments are also required for fiscal years ending after June 15, 2004. FAS 132 revisions also include additional disclosure requirements for interim financial reports beginning after December 15, 2003. (See Note 12). Given that all of the

9

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Company’s defined benefit plans cover foreign employees, the Company is required to implement the additional disclosures beginning in its 2004 consolidated financial statements.

In March 2004, the Emerging Issues Task Force (EITF) reached a final consensus on EITF 03-1, The Meaning of Other-Than-Temporary Impairments and its Application to Certain Investments, which was initially to be effective for fiscal periods beginning after June 15, 2004. On October 4, 2004, the FASB issued FASB Staff Position (FSP) No. EITF Issue 03-1-1 delaying the effective date for the guidance that addresses recognition and measurement of other-than-temporary impairments of EITF 03-1, as contained in paragraphs 10-20, until certain implementation issues are addressed and another FSP (the final FSP) providing implementation guidance is issued. The final FSP providing implementation guidance is expected to be issued in December 2004. The final FSP is expected to address matters such as: 1) the level of impairment that can be considered temporary that would not create the need for an assertion about the ability and intent to hold an investment until a forecasted recovery; and 2) the circumstances under which an investor can sell securities at a loss that would not call into question the investor’s ability or intent to hold other unsold securities to recovery. Pursuant to the Company’s current policy on other-than-temporary impairments, the Company generally does not consider impairments of debt and equity securities to be other-than-temporary when: i) the impairment is caused solely by temporary market changes, such as interest rates and/or sector spreads for debt securities and standard fluctuations in the equity markets for equity securities; ii) the duration of the impairment is less than one year (unless the severity of the impairment exceeds 20 percent and the duration is 9 months or greater); and iii) subsequent sales of securities at a realized loss are based on changes in facts and circumstances after the balance sheet date and consistent with the classification of the investment portfolio as available-for-sale, including sales to support operational needs and those precipitated by changes in market conditions after the balance sheet date affecting the availability and the yield on alternative investments. For all other impaired securities, the Company must prove a specific ability and intent to hold to recovery. More often than not, the Company recognizes an other-than-temporary impairment for such securities. Once EITF 03-1 is finalized, the Company will complete an evaluation as to the impact on its policy and process for determining other-than-temporary impairments for marketable debt and equity securities. As a result of the Company’s adoption of paragraphs 10-20 of EITF 03-1 and the final FSP, the Company may potentially reclassify certain unrealized capital losses associated with certain securities classified as available-for-sale to realized capital losses, may be required to accelerate the realization of impairment losses through income, and/or re-designate certain investments as trading securities in accordance with FASB No. 115. Adoption of this standard is not expected to have a material impact on shareholders’ equity since fluctuations in fair value of available-for-sale securities are already recorded in accumulated other comprehensive income; however, it could have a material effect on results of operations.

On March 31, 2004, the FASB issued an Exposure Draft, Share Based Payment – an amendment of Statements 123 and 95 (Exposure Draft 123). Exposure Draft 123 was to be applied for fiscal years beginning after December 15, 2004. Subsequently, on October 13, 2004, the FASB concluded that its proposed statement, which would require all companies to measure compensation cost for all share-based payment awards (including employee stock options) at fair value, would be effective for public companies for interim or annual periods beginning after June 15, 2005. The FASB expects to issue a final standard by December 31, 2004. This standard will likely be known as FASB Statement No. 123R (Revised 2004) (FAS 123R). Retroactive application of the requirements of FASB Statement No. 123 (not FAS 123R) to the beginning of the fiscal year, or January 1, 2005 for a calendar year company, would be permitted, but not required. In accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), the Company has not recognized compensation expense for options in net income because the exercise price equaled the market value of the underlying common stock on the grant date. If Exposure Draft 123 is adopted as proposed, FAS 123R will require the Company to expense employee stock options and therefore, could have a material effect on results of operations and financial condition. The ultimate amount of compensation cost to be recognized is dependent on the final standard, the model and related assumptions used to determine the fair value of the options awarded, and the actual amount of employee stock options awarded in 2005. Once issued, the Company will complete its evaluation of the effect of this standard.

The FASB has issued an Exposure Draft, Earnings per Share – an amendment of FASB 128 (Exposure Draft 128), which would amend the computational guidance in FAS 128, Earnings per Share, for calculating the number of incremental shares included in diluted shares when applying the treasury stock method. Exposure Draft 128 eliminates the provisions that allow an entity to rebut the presumption that contracts with the option of settling in either cash or stock will be settled in stock and would require that shares to be issued upon conversion of a mandatory convertible security be included in the weighted-average number of ordinary shares outstanding used in computing basic earnings per share from the date on which conversion becomes mandatory. If Exposure Draft 128 is adopted consistent with the FASB’s amendment of the original timing proposed, it will be effective for financial statements for both interim and annual periods ending after December 15, 2004. After the effective date, if Exposure Draft 128 is adopted as proposed, all prior-period EPS data presented will be adjusted retrospectively to conform with the provisions of Exposure Draft 128. Once issued, the Company will complete its evaluation of the effect of this standard.

10

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

3. Catastrophe Charges

During the current quarter, the Company incurred net catastrophe-related pre-tax charges of $479 million primarily associated with hurricanes which struck the Caribbean and the U.S. and, to a lesser extent, typhoons which impacted Asia (collectively referred to as catastrophe charges). The following table shows the impact of the catastrophe charges on each of our operating segments in the three and nine months ended September 30, 2004 (there were no catastrophe charges incurred in the first half of 2004).

Catastrophe Loss Charges—By Event	Insurance—North American			Insurance—Overseas General			Global Reinsurance			Consolidated P&C			Financial Services		Total
	(in millions of U.S. dollars)
Gross loss	$	426		$	157		$	284		$	867		$	11	$	878
Net loss
Hurricane—Charley	$	31		$	—		$	65		$	96		$	—	$	96
Hurricane—Frances		22			6			48			76			5		81
Hurricane—Ivan		40			20			76			136			5		141
Hurricane—Jeanne		33			18			63			114			1		115
Typhoons		—			9			26			35			—		35
Total		126			53			278			457			11		468
Reinstatement premiums (earned) expensed		13			13			(15	)		11			—		11
Total impact before income tax		139			66			263			468			11		479
Income tax benefit		(41	)		(21	)		(11	)		(73	)		—		(73	)
Total impact after income tax	$	98		$	45		$	252		$	395		$	11	$	406

4. Sale of financial and mortgage guaranty business through Assured Guaranty Ltd.

On April 28, 2004, the Company completed the sale of 65.3 percent of its U.S. financial and mortgage guaranty reinsurance and insurance businesses (transferred business) through the initial public offering (IPO) of 49 million common shares of Assured Guaranty Ltd. (Assured Guaranty) at $18.00 per share. Assured Guaranty was incorporated in Bermuda in August 2003 for the sole purpose of becoming a holding company for the transferred business.

Pursuant to the completion of the IPO, the Company received proceeds, net of offering costs, of approximately $835 million and a return of capital of $200 million. The transaction resulted in a reduction of shareholders’ equity of $61.1 million, representing the difference between net proceeds and the carrying value of 65.3 percent of Assured Guaranty at April 28, 2004 as well as taxes incurred on the transaction. The transaction also resulted in a pre-tax realized loss of $6.7 million which is included in realized gains (losses) in the accompanying statement of operations and an after-tax loss of $18.1 million, which consists of the following:

Loss on sale of financial and mortgage guaranty businesses	$	(49.7	)
Realization of accumulated other comprehensive income on companies sold		43.0
Pre-tax loss included in net realized gains (losses)		(6.7	)
Income tax expense		11.4
After-tax loss	$	(18.1	)

A description of each component of the loss is as follows:

• The loss on the sale of the transferred business of $49.7 million represents the difference between the carrying value of the Company’s interest in Assured Guaranty sold and net proceeds of the offering.

• The realization of accumulated other comprehensive income on companies sold of $43.0 million principally relates to the unrealized appreciation of available-for-sale securities included in the carrying value of the interest in Assured Guaranty sold; such gains had no effect on shareholders’ equity.

• Income tax expense of $11.4 million principally relates to federal income taxes incurred from the transferred business to Assured Guaranty and attributed to the Assured Guaranty shares sold by the Company. The income tax expense results from differences in the basis of the assets of the transferred subsidiaries for financial reporting purposes compared to the corresponding tax basis. In connection with its sale and pursuant to a tax allocation agreement, Assured Guaranty will make a tax election that will have the effect of increasing the tax basis of tangible and intangible assets to fair value. Future tax benefits that Assured Guaranty derives from this election will be payable to ACE and recognized by ACE when realized by Assured Guaranty.

Subsequent to the completion of the IPO, the Company beneficially owns 26 million common shares, or 34.7 percent of Assured Guaranty’s outstanding common shares and accordingly, no longer consolidates its interest in the Assured Guaranty companies. The retained interest is accounted for under the equity method of accounting with the Company’s carrying value of its investment reflected in other investments within the consolidated balance sheet and the proportionate share of earnings reflected in other (income) expense within the consolidated statement of operations. At September 30, 2004, the Company’s carrying value of its investment in Assured Guaranty is $509 million.

The Company recognized compensation expense of $7.5 million in connection with the settlement of ACE stock awards held by the employees of Assured Guaranty during the three months ended June 30, 2004. These expenses are reflected in other (income) expense within the consolidated statement of operations.

In connection with the IPO, the Company has entered into reinsurance agreements with Assured Guaranty in order to retain the insurance liabilities of certain run-off businesses, including trade credit and residual value insurance. At their inception, these contracts had no effect on the Company’s income. Additionally, the Company has entered into a number of agreements with Assured Guaranty that will govern certain aspects of the relationship after this offering, including service agreements under which the Company will provide certain services to Assured Guaranty for a period of time.

The assets and liabilities of Assured Guaranty aggregated to $2.8 billion and $1.4 billion at December 31, 2003. Total revenues of Assured Guaranty included in the accompanying financial statements were $114.9 million and $295.8 million for the nine months ended September 30, 2004 and 2003, respectively. Net income of the

11

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Assured Guaranty companies included in the accompanying financial statements were $39.5 million and $117.1 million for the nine months ended September 30, 2004 and 2003, respectively.

5. Investments

The following table summarizes, for all securities in an unrealized loss position at September 30, 2004 (including securities on loan), the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position.

	0 – 12 Months				Over 12 Months				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
	(in thousands of U.S. dollars)
U.S. Treasury and agency	$	1,361,078	$	5,543	$	—	$	—	$	1,361,078	$	5,543
Non-U.S. governments		1,734,666		17,023		—		—		1,734,666		17,023
Corporate securities		3,126,363		23,520		—		—		3,126,363		23,520
Mortgage-backed securities		2,173,005		12,654		—		—		2,173,005		12,654
States, municipalities and political subdivisions		79,681		515		—		—		79,681		515
Total fixed maturities		8,474,793		59,255		—		—		8,474,793		59,255
Equity securities		243,546		16		—		—		243,546		16
Other investments		61		5		—		—		61		5
Total	$	8,718,400	$	59,276	$	—	$	—	$	8,718,400	$	59,276

6. Goodwill

FAS No. 142, “Goodwill and Other Intangible Assets” (FAS 142) primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition. All goodwill recognized in the Company’s consolidated balance sheet at January 1, 2002 was assigned to one or more reporting units. FAS 142 requires that goodwill in each reporting unit be tested for impairment annually. Based on a review performed during the first quarter of 2004, the Company recognized a goodwill impairment loss of $11.3 million primarily relating to the Company’s Lloyd’s life syndicate. On April 28, 2004, the Company completed the sale of Assured Guaranty. As a result of the sale, goodwill was reduced by $85.4 million in the second quarter of 2004. In addition, as a result of a profitability review performed during the current quarter, it was determined that current expectations for future profitability of a wholly owned administration company were not sufficient to support a portion of the current carrying amount of goodwill. Accordingly, the Company recognized a goodwill impairment of $1.7 million in the third quarter of 2004. The following table details the movement in goodwill by segment for the nine months ended September 30, 2004.

	Insurance – North American			Insurance – Overseas General		Global Reinsurance		Financial Services			ACE Consolidated
	(in thousands of U.S. dollars)
Goodwill at beginning of period	$	1,127,513		$	1,121,636	$	364,958	$	96,723		$	2,710,830
Goodwill impairment loss		(1,658	)		—		—		(11,305	)		(12,963	)
Sale of subsidiary		—			—		—		(85,418	)		(85,418	)
Goodwill at end of period	$	1,125,855		$	1,121,636	$	364,958	$	—		$	2,612,449

7. Asbestos and environmental claims

Included in the Company’s liabilities for losses and loss expenses are amounts for asbestos, environmental and latent injury damage claims and expenses (A&E). These A&E liabilities principally relate to claims arising from remediation costs associated with hazardous waste sites and bodily-injury claims related to asbestos products and environmental hazards. The estimation of these liabilities is particularly sensitive to the recent legal environment, including specific settlements that may be used as precedents to settle future claims. These amounts include provision for both reported and IBNR claims.

The table below presents selected loss reserve data for A&E exposures at September 30, 2004 and December 31, 2003.

	September 30, 2004				December 31, 2003
	Gross		Net		Gross		Net
	(in millions of U.S. dollars)
Asbestos	$	2,730	$	172	$	3,026	$	300
Environmental and other latent exposures		1,007		155		1,148		250
Total	$	3,737	$	327	$	4,174	$	550

Paid losses in the nine months ended September 30, 2004 for asbestos claims were $300 million on gross reserves and $131 million on net reserves. Foreign exchange revaluation decreased the gross asbestos reserve by $2 million and increased the net reserve by $1 million in 2004. Environmental and other latent exposure claim payments were $141 million on gross reserves and $95 million on net reserves in the nine months ended September 30, 2004. The gross and net reserves for asbestos at December 31, 2003 were increased to reflect a reclassification of pre-1987 asbestos claims from general liability reserves for comparative purposes.

The Company’s exposure to A&E claims principally arises out of liabilities acquired when we purchased Westchester Specialty in 1998 and the P&C business of CIGNA in 1999, with the larger exposure contained within the liabilities acquired in the CIGNA transaction. In 1996, prior to our acquisition of the P&C business of CIGNA, the Pennsylvania Insurance Commissioner approved a plan to restructure INA Financial Corporation and its subsidiaries which included a division of Insurance Company of North America (“INA”) into two separate corporations: (1) an active insurance company that retained the INA name and continued to write property-casualty business and (2) an inactive run-off company, now called Century Indemnity Company (“Century”), that succeeded to the A&E and other liabilities of INA under certain policies. As part of this restructuring, the A&E liabilities of various domestic and international INA subsidiaries were reinsured to Century and other subsidiaries of Brandywine Holdings Corporation (“Brandywine”), the current parent company of Century. As part of the Company’s 1999 acquisition of the P&C business of CIGNA, the Company acquired Brandywine and its various subsidiaries, including Century.

The Company is currently conducting a review of the numerous agreements and arrangements entered into in 1996 to accomplish the INA Financial restructuring, including the dividend retention fund and aggregate excess of loss reinsurance agreement discussed below, as well as certain agreements entered into in connection with the NICO/Bradywine cover discussed below, to determine the implications, which could be substantial, of the Company’s options with respect to its ongoing relationship with Century and the other Brandywine companies.

As part of the acquisition of Westchester Specialty, National Indemnity Company (“NICO”) provided $750 million of reinsurance protection for adverse development on loss and loss adjustment expense reserves. At September 30, 2004, the remaining unused limit in this NICO Westchester Specialty cover was $600 million.

As part of the acquisition of the CIGNA P&C business, NICO provided $2.5 billion of reinsurance protection to Century on all Brandywine loss and loss adjustment expense reserves, for any uncollectible reinsurance and on the A&E reserves of the domestic and international ACE INA insurance subsidiaries reinsured by Century. The benefits of this NICO contract flow to the other Brandywine companies and to the ACE INA insurance subsidiaries through reinsurance agreements between those companies and Century. This NICO/Brandywine cover was exhausted on an incurred basis with the increase in our A&E reserves in the fourth quarter of 2002.

The domestic ACE INA companies retain two primary funding obligations associated with the run-off Brandywine operations: a dividend retention fund obligation and required reinsurance coverage provided under an aggregate excess of loss reinsurance agreement. In accordance with the Brandywine restructuring order, INA Financial Corporation established and funded a dividend retention fund (the “Dividend Retention Fund”) consisting of $50 million plus investment earnings. Pursuant to terms of the restructuring, the full balance of this Dividend Retention Fund was contributed to Century as of December 31, 2002. To the extent in the future that dividends are paid by INA Holdings Corporation to its parent, INA Financial Corporation, and to the extent that INA Financial Corporation then pays such dividends to INA Corporation, a portion of those dividends must be withheld to replenish the principal of the Dividend Retention Fund to $50 million within five years. In 2003 and thus far in 2004, no such dividends were paid, and therefore no replenishment of the Dividend Retention Fund occurred. This dividend fund obligation, to maintain and to replenish the fund as necessary and to the extent dividends are paid, is ongoing until ACE INA receives prior written approval from the Pennsylvania Commissioner of Insurance to terminate the fund.

In addition, the ACE INA insurance subsidiaries are obligated to provide insurance coverage to Century in the amount of $800 million under an aggregate excess of loss reinsurance agreement (the “XOL Agreement”) if the statutory capital and surplus of Century falls below $25 million or if Century lacks liquid assets with which to pay claims as they become due, after giving effect to contribution of any Dividend Retention Fund balance. Coverage under the XOL Agreement was triggered as of December 31, 2002 following contribution of the Dividend Retention Fund balance. Approximately $463 million in GAAP basis losses were ceded under the XOL Agreement at September 30, 2004. Century reports the amount ceded under the XOL Agreement in accordance with statutory accounting principles which differ from GAAP by, among other things, allowing Century to discount its reserves.

The Pennsylvania Insurance Department requires a biennial, external actuarial review of liabilities residing in Century Indemnity Company as well as certain other U.S. subsidiaries of Brandywine. That review was last completed during the first quarter of 2003 and the Company recorded the financial impact in the year ended December 31, 2002. The Company expects the next review to be completed during the fourth quarter of 2004 and to record any financial impact in the year ending December 31, 2004.

In a lawsuit filed in the state of California in December 1999, certain of the Company’s competitors have challenged the restructuring that resulted in the creation of Brandywine. The restructuring was previously upheld by the Pennsylvania Supreme Court in July 1999. The lawsuit alleges that the restructuring does not effectively relieve the insurance subsidiary that issued the policies prior to the restructuring (Insurance Company of North America) from liabilities for claims on those policies by California policyholders. The California trial court has held in response to a pre-trial motion that a California statute does prohibit the transfer of California policies to a subsequent legal entity without the consent of the policyholders and noted that consent was not received in the context of the Brandywine restructuring. ACE intends to appeal this decision following completion of the remaining issues in the case in the trial court. The liabilities that are the subject of this California lawsuit are included within our A&E reserves for Brandywine.

The current case law regarding A&E claims can be characterized as still evolving and the Company does not believe that any firm direction will develop in the near future. Therefore, it is not possible to determine the future development of A&E claims with the same degree of reliability as with other types of claims. Such future development will be affected by the extent to which courts continue to expand the liabilities of defendants as well as to expand the intent of the policies and the scope of the coverage, as they have in the past.

The U.S. Congress has from time to time considered possible legislation with respect to U.S. asbestos bodily-injury claims. The Company cannot predict if and when any such legislation will be enacted, what the terms of any such legislation would be and what the costs and benefits to ACE would be.

8. Reinsurance

a) Consolidated reinsurance

The Company purchases reinsurance to manage various exposures including catastrophe risks. Although reinsurance agreements contractually obligate the Company’s reinsurers to reimburse it for the agreed-upon portion of its gross paid losses, they do not discharge the primary liability of the Company. The amounts for net premiums written and net premiums

12

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

earned in the statements of operations are net of reinsurance. Direct, assumed and ceded amounts for these items for the three and nine months ended September 30, 2004 and 2003 are as follows:

	Three Months Ended September 30						Nine Months Ended September 30
	2004			2003			2004			2003
	(in thousands of U.S. dollars)
Premiums written
Direct	$	3,367,347		$	2,798,564		$	10,107,887		$	8,651,950
Assumed		614,455			652,348			2,330,247			2,316,644
Ceded		(1,213,252	)		(1,144,781	)		(3,564,487	)		(3,326,418	)
Net	$	2,768,550		$	2,306,131		$	8,873,647		$	7,642,176
Premiums earned
Direct	$	3,368,643		$	2,957,712		$	9,624,557		$	8,558,501
Assumed		665,647			701,051			1,885,751			1,875,242
Ceded		(1,181,006	)		(1,261,238	)		(3,268,669	)		(3,658,094	)
Net	$	2,853,284		$	2,397,525		$	8,241,639		$	6,775,649

The composition of the Company’s reinsurance recoverable at September 30, 2004 and December 31, 2003, is as follows:

	September 30 2004			December 31 2003
	(in thousands of U.S. dollars)
Reinsurance recoverable on paid losses and loss expenses	$	1,058,618		$	1,277,119
Bad debt reserve on paid losses and loss expenses		(428,180	)		(402,680	)
Reinsurance recoverable on future policy benefits		15,744			14,668
Reinsurance recoverable on unpaid losses and loss expenses		14,222,669			13,749,189
Bad debt reserve on unpaid losses and loss expenses		(600,396	)		(557,580	)
Net reinsurance recoverable	$	14,268,455		$	14,080,716

The Company evaluates the financial condition of its reinsurers and potential reinsurers on a regular basis and also monitors concentrations of credit risk with reinsurers. Provisions have been established for amounts estimated to be uncollectible.

Following is a breakdown of the Company’s reinsurance recoverable on paid losses at September 30, 2004 and December 31, 2003:

	September 30, 2004						December 31, 2003
Category	Amount		Bad Debt Reserve		% of Total		Amount		Bad Debt Reserve		% of Total
	(in millions of U.S. dollars)
General collections	$	550	$	46	8.4	%	$	730	$	45	6.2	%
Other		509		382	75.0	%		547		358	65.4	%
Total	$	1,059	$	428	40.4	%	$	1,277	$	403	31.6	%

General collections balances represents amounts in the process of collection in the normal course of business for which the Company has no indication of dispute or credit-related issues.

The other category includes amounts recoverable that are in dispute or are from companies who are in supervision, rehabilitation or liquidation. The Company’s estimation of the reserve for other, considers the merits of the underlying matter, the credit quality of the reinsurer and whether the Company has received collateral or other credit protections such as parental guarantees.

13

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

b) Reinsurance programs involving minimum benefit guarantees under annuity contracts

Beginning in 2000, the Company has been engaged in reinsuring various death and living benefit guarantees associated with variable annuities issued primarily in the United States. Each reinsurance treaty covers variable annuities written during a limited period, typically not exceeding two years. The Company generally receives a monthly premium during the accumulation phase of the covered annuities (in-force) based on a percentage of the underlying accumulated account values. Depending on an annuitant’s age, the accumulation phase can last many years. To limit the Company’s exposure under these programs, all reinsurance treaties include aggregate claim limits and many include an aggregate deductible.

The guarantees which are payable on death, referred to as guaranteed minimum death benefits (GMDBs), principally cover shortfalls between accumulated account value at the time of an annuitant’s death and either i) an annuitant’s total deposits; ii) an annuitant’s total deposits plus a minimum annual return; or iii) the highest accumulated account value attained during any policy anniversary date. In addition, a death benefit may be based on a formula specified in the variable annuity contract that uses a percentage of the growth of the underlying contract value. Reinsurance programs covering GMDBs are accounted for pursuant to SOP 03-1. (See Note 2).

Under reinsurance programs covering living benefit guarantees, the Company assumes the risk of guaranteed minimum income benefits (GMIBs) associated with variable annuity contracts. The GMIB risk is triggered if, at the time the contract holder elects to convert the accumulated account value to a periodic payment stream (annuitize), the accumulated account value is not sufficient to purchase a guaranteed minimum level of monthly income. The Company’s GMIB reinsurance product meets the definition of a derivative for accounting purposes and is therefore carried at fair value with changes in fair value recognized in income in the period of the change pursuant to FAS 133. As the assuming entity, the Company is obligated to provide coverage until the expiration of the underlying annuities. Therefore, to best disclose the nature of the underlying risk over the exposure period within the statement of operations, the Company presents the change in fair value as follows. Premiums received under the reinsurance treaties are classified as premium. Expected losses allocated to premiums received are classified as life and annuity benefits and valued pursuant to SOP 03-1, similar to GMDB reinsurance. Other changes in fair value, principally arising from changes in expected losses allocated to expected future premiums, are classified as realized gains (losses). As fair value generally represents the cost to exit a business and thus includes a risk margin, the Company may recognize a loss for other changes in fair value during a given period due to temporary adverse changes in the capital markets (i.e. declining interest rates and/or declining equity markets) even when the Company continues to expect the business to be profitable. Management believes this presentation provides the most meaningful disclosure of changes in the underlying risk within the GMIB reinsurance programs for a given reporting period.

The presentation of income and expenses relating to GMDB and GMIB reinsurance for the three and nine months ending September 30, 2004 and 2003, are as follows:

	Three Months Ended September 30					Nine Months Ended September 30
	2004			2003		2004			2003
	(in millions of U.S. dollars)
GMDB
Net premiums earned	$	12.0		$	4.5	$	31.9		$	19.6
Life and annuity benefits expense	$	5.8		$	3.1	$	13.1		$	15.7
GMIB
Net premiums earned	$	17.3		$	8.1	$	45.4		$	15.3
Life and annuity benefits expense	$	8.3		$	3.8	$	18.0		$	7.4
Realized gains (losses)	$	(41.2	)	$	—	$	(50.8	)	$	—

At September 30, 2004, reported liabilities for GMDB and GMIB reinsurance were $30.8 million and $92.1 million, respectively, compared with $30.5 million and $22.8 million, respectively, at December 31, 2003. Reported liabilities for both GMDB and GMIB reinsurance are determined using internal valuation models. Such valuations require considerable judgment and are subject to significant uncertainty. The valuation of these products is subject to fluctuations arising from, among other factors, changes in interest rates, changes in the equity markets, and changes in the allocation of the investments underlying annuitant’s account value. These models and the related assumptions are continually reviewed by management and enhanced, as appropriate, based upon improvements in modeling techniques and availability of more timely information, such as market conditions and demographics of in-force annuities.

14

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

At September 30, 2004, the Company’s net amount at risk from its GMDB and GMIB reinsurance programs are $372 million and $21 million, respectively. For the GMDB programs, the net amount at risk is defined as the excess, if any, of the current guaranteed value over the current account value. For the GMIB programs, the net amount at risk is defined as the excess, if any, of the present value of the minimum guaranteed annuity payments over the present value of the annuity payments otherwise available to each policyholder.

9. Commitments, contingencies and guarantees

The Company invests in private equity partnerships with a carrying value of $95 million included in other investments. In connection with these investments, the Company has commitments that may require funding of up to $123 million over the next several years.

The Company’s insurance subsidiaries are subject to claims litigation involving disputed interpretations of policy coverages and, in some jurisdictions, direct actions by allegedly-injured persons seeking damages from policyholders. These lawsuits, involving claims on policies issued by our subsidiaries which are typical to the insurance industry in general and in the normal course of business, are considered in the Company’s loss and loss expense reserves. In addition to claims litigation, the Company and its subsidiaries are subject to lawsuits and regulatory actions in the normal course of business that do not arise from or directly relate to claims on insurance policies. This category of business litigation typically involves, inter alia, allegations of underwriting errors or misconduct, employment claims, regulatory activity or disputes arising from business ventures. While the outcomes of the business litigation involving the Company cannot be predicted with certainty at this point, the Company is disputing, and will continue to dispute, allegations against it that are without merit. The Company believes that the ultimate outcomes of matters in this category of business litigation will not have a material adverse effect on the financial condition, future operating results or liquidity of the Company, although an adverse resolution of a number of these items could have a material adverse effect on the Company’s results of operations in a particular quarter or fiscal year.

ACE has received subpoenas from the office of the New York Attorney General (the NYAG) and from other state attorneys general in connection with investigations of certain insurance industry practices (the AG Investigations). On October 14, 2004, the NYAG filed a civil suit against Marsh & McLennan Companies Inc. (Marsh), alleging that certain Marsh business practices were fraudulent and violated antitrust and securities laws. ACE was not named as a defendant in the suit, although ACE was named as one of four insurance companies whose employees participated in the practices in question.

Several purported shareholder class action lawsuits have been filed against ACE and certain of its present and former executive officers relating to certain of the practices being investigated by the AG Investigations. In addition, the plaintiffs in a pending lawsuit originally brought by policyholders against brokers has been amended by adding ACE and other carriers as additional defendants. ACE intends to vigorously defend against these actions.

Pursuant to the AG Investigations, ACE has decided to eliminate the use of placement service agreements (PSAs) that provide insurance brokers additional commissions based on the extent of premiums produced. Because the insurance brokers represent ACE’s largest distribution channel, the elimination of PSAs and any other changes in business practices of insurance brokers resulting from the AG Investigations could potentially impact ACE’s future premium volume although such effect, if any, cannot be quantified at this time.

10. Credit facilities

In April 2004, the Company replaced its $500 million, 364-day revolving credit facility and its $250 million, five-year revolving credit facility with a $600 million three-year credit facility. This facility is available for general corporate purposes, commercial paper back-up and the issuance of letters of credit (LOCs). At September 30, 2004, the outstanding LOCs issued under the replaced facilities was $64 million and commercial paper outstanding was $146 million. There were no other drawings or LOCs issued under these facilities.

During the current quarter we entered into an $850 million unsecured operational LOC facility and a $500 million secured operational LOC facility, both expiring in September 2007. These facilities replace four LOC facilities permitting up to $1.4 billion of LOCs. Upon the effectiveness of the new LOC facilities, all outstanding LOCs issued under the replaced facilities were deemed to have been issued under the unsecured LOC facility and the replaced facilities terminated.

15

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

11. Debt

The following table outlines the Company’s debt at September 30, 2004 and December 31, 2003.

	September 30 2004		December 31 2003
	(in millions of U.S. dollars)
Short-term debt
ACE INA commercial paper	$	146	$	146
ACE INA Notes due August 2004		—		400
		146		546
Long-term debt
ACE INA Notes due 2006		300		300
ACE Limited Senior Notes due 2007		500		499
ACE US Holdings Senior Notes due 2008		250		250
ACE INA Subordinated Notes due 2009		200		200
ACE INA Senior Notes due 2014		499		—
ACE INA Debentures due 2029		100		100
	$	1,849	$	1,349
Trust Preferred Securities
ACE INA Trust Preferred Securities due 2029	$	103	$	100
ACE INA Capital Securities due 2030		309		300
Capital Re LLC Monthly Income Preferred Securities due 2044		—		75
	$	412	$	475

a) Short-term debt

The Company has commercial paper programs that use revolving credit facilities as back-up facilities and provide for up to $2.8 billion in commercial paper issuance (subject to the availability of back-up facilities, which totaled $600 million at September 30, 2004) for ACE and for ACE INA. For the nine months ended September 30, 2004 and 2003, commercial paper interest rates averaged 1.4 percent, for both years.

b) ACE INA senior notes

In June 2004, ACE INA issued $500 million of 5.875 percent notes due June 15, 2014. The notes are not redeemable before maturity and do not have the benefit of any sinking fund. These senior unsecured notes are guaranteed on a senior basis by the Company and they rank equally with all of the Company’s other senior obligations. They also contain a customary limitation on lien provisions as well as customary events of default provisions which, if breached, could result in the accelerated maturity of such senior debt. The proceeds of the notes were used partly to repay $75 million of Capital Re LLC trust preferred securities on July 12, 2004. The balance was used to repay $400 million of ACE INA 8.2 percent notes, which matured on August 15, 2004, and for general corporate purposes.

c) Capital Re LLC monthly income preferred securities

On July 12, 2004, Capital Re LLC redeemed all $75 million of its 7.65 percent cumulative monthly income preferred securities, series A. The redemption was funded by a portion of the net proceeds of the $500 million 5.875 percent senior notes sold by ACE INA.

12. Defined benefit plans

The Company maintains non-contributory defined benefit plans that cover certain foreign employees, principally located in Europe and Asia. The Company does not provide any such plans to U.S. employees. Benefits under these plans are based on employees’ years of service and compensation during final years of service. All underlying defined benefit plans are subject

16

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

to periodic actuarial valuation by qualified local actuarial firms. The Company funds the plans at the amount required by FAS No. 87, “Employers’ Accounting for Pensions” (FAS 87). The accumulated benefit obligation is compared to plan assets, both as defined in FAS 87, and any resulting deficiency is recorded as a liability.

Net periodic benefit costs recognized by component for the three and nine months ended September 30, 2004 and 2003 are as follows:

	Three Months Ended September 30						Nine Months Ended September 30
	2004			2003			2004			2003
	(in thousands of U.S. dollars)
Components of net benefit cost
Service cost	$	1,342		$	1,355		$	4,070		$	4,064
Interest cost		3,538			3,807			11,484			11,423
Expected return on plan assets		(2,969	)		(2,975	)		(9,905	)		(8,924	)
Amortization of net transition asset		2			2			5			5
Amortization of prior service cost		26			24			77			73
Amortization of net actuarial loss		1,392			1,505			4,558			4,511
Net benefit cost	$	3,331		$	3,718		$	10,289		$	11,152

13. Restricted stock awards

Under the Company’s long-term incentive plans, 1,591,251 restricted Ordinary Shares were awarded during the nine months ended September 30, 2004, to officers of the Company and its subsidiaries. These shares vest at various dates through September 30, 2008. In addition, during the period, 30,361 restricted Ordinary Shares were awarded to outside directors under the terms of the 1995 Outside Directors Plan. These shares vest in May 2005.

At the time of grant the market value of the shares awarded under these grants is recorded as unearned stock grant compensation and is presented as a separate component of shareholders’ equity. The unearned compensation is charged to income over the vesting period using the accelerated method.

17

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

14. Earnings (loss) per share

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

	Three Months Ended September 30						Nine Months Ended September 30
	2004			2003			2004			2003
	(in thousands of U.S. dollars, except share and per share data)
Numerator:
Net income (loss)	$	(2,620	)	$	354,965		$	857,214		$	972,877
Dividends on Preferred Shares		(11,213	)		(11,214	)		(33,761	)		(14,900	)
Dividends on Mezzanine equity		—			—			—			(9,773	)
Net income (loss) available to holders of Ordinary Shares	$	(13,833	)	$	343,751		$	823,453		$	948,204
Denominator:
Denominator for basic earnings (loss) per share:
Weighted average shares outstanding		280,993,760			275,404,544			279,988,076			268,474,758
Effect of other dilutive securities		—			6,485,692			5,298,054			5,731,326
Denominator for diluted earnings per share:
Adjusted weighted average shares outstanding and assumed conversions		280,993,760			281,890,236			285,286,130			274,206,084
Basic earnings (loss) per share	$	(0.05	)	$	1.25		$	2.94		$	3.53
Diluted earnings (loss) per share	$	(0.05	)	$	1.22		$	2.88		$	3.46

The denominator for diluted loss per share for the three months ended September 30, 2004 does not include the dilutive effect of other dilutive securities. The incremental shares from assumed conversions are not included in computing diluted loss per share amounts as these shares are considered anti-dilutive. Other dilutive securities totaled 4,623,319 shares for the three months ended September 30, 2004.

15. FAS 148 Pro Forma Disclosures

In December 2002, FASB issued FAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure” (FAS 148). FAS 148 amends the disclosure requirements of FAS No. 123 “Accounting for Stock-Based Compensation” (FAS 123) to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based compensation and the effect of the method used on reported results. The Company continues to account for stock-based compensation plans in accordance with APB 25. No compensation expense for options is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of the grant.

18

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Following is a summary of options issued and outstanding for the three and nine months ended September 30, 2004 and 2003:

	Year of Expiration	Average Exercise Price		Options for Ordinary Shares		Year of Expiration	Average Exercise Price		Options for Ordinary Shares
	Three Months Ended September 30, 2004					Three Months Ended September 30, 2003
Balance – beginning of period				17,582,940					20,444,862
Options granted	2014	$	41.45	108,600		2013	$	32.86	203,000
Options exercised	2004 - 2013	$	40.17	(462,646	)	2003 - 2010	$	33.12	(560,738	)
Options forfeited	2008 - 2014	$	40.34	(530,734	)	2009 - 2013	$	37.74	(249,800	)
Balance – end of period				16,698,160					19,837,324
	Nine Months Ended September 30, 2004					Nine Months Ended September 30, 2003
Balance – beginning of period				18,391,136					19,312,287
Options granted	2014	$	43.44	2,243,910		2013	$	28.02	3,686,962
Options exercised	2004 - 2014	$	43.07	(3,132,583	)	2003 - 2011	$	33.86	(2,632,109	)
Options forfeited	2006 - 2014	$	40.57	(804,303	)	2003 - 2013	$	38.66	(529,816	)
Balance – end of period				16,698,160					19,837,324

The following table outlines the Company’s net income available to holders of Ordinary Shares and diluted earnings per share for the three and nine months ended September 30, 2004 and 2003, had the compensation cost been determined in accordance with the fair value method recommended in FAS 123.

	Three Months Ended September 30					Nine Months Ended September 30
	2004			2003		2004		2003
	(in thousands of U.S. dollars, except per share data)
Net income (loss) available to holders of Ordinary Shares:
As reported	$	(13,833	)	$	343,751	$	823,453	$	948,204
Add: Stock-based compensation expense included in reported net income, net of income tax		9,287			5,401		33,116		18,106
Deduct: Compensation expense, net of income tax		16,311			13,070		58,411		39,899
Pro forma	$	(20,857	)	$	336,082	$	798,158	$	926,411
Basic earnings (loss) per share:
As reported	$	(0.05	)	$	1.25	$	2.94	$	3.53
Pro forma	$	(0.07	)	$	1.22	$	2.85	$	3.45
Diluted earnings (loss) per share:
As reported	$	(0.05	)	$	1.22	$	2.88	$	3.46
Pro forma	$	(0.07	)	$	1.19	$	2.80	$	3.38

The fair value of the options issued is estimated on the date of grant using the Black-Scholes option-pricing model, with the following weighted-average assumptions used for grants for the three months ended September 30, 2004 and 2003, respectively: dividend yield of 1.85 percent and 2.32 percent, expected volatility of 24.31 percent and 30.75 percent, risk free interest rate of 3.61 percent and 2.76 percent. The expected life is four years and the forfeiture rate is 5 percent for 2004 and 2003.

The following weighted-average assumptions were used for the nine months ended September 30, 2004 and 2003, respectively: dividend yield of 1.75 percent and 2.45 percent, expected volatility of 26.65 percent and 32.67 percent, risk free interest rate of 2.77 percent and 2.35 percent. The expected life is four years and the forfeiture rate is 5 percent for 2004 and 2003.

19

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

16. Taxation

Under current Cayman Islands’ law, the Company is not required to pay any taxes in the Cayman Islands on its income or capital gains. The Company has received an undertaking that, in the event of any taxes being imposed, the Company will be exempted from taxation in the Cayman Islands until the year 2013. Under current Bermuda law, the Company and its Bermuda subsidiaries are not required to pay any taxes in Bermuda on its income or capital gains. The Company has received an undertaking from the Minister of Finance in Bermuda that, in the event of any taxes being imposed, the Company will be exempt from taxation in Bermuda until March 2016.

Income from the Company’s operations at Lloyd’s is subject to United Kingdom corporation taxes. Lloyd’s is required to pay U.S. income tax on U.S. connected income (U.S. income) written by Lloyd’s syndicates. Lloyd’s has a closing agreement with the IRS whereby the amount of tax due on this business is calculated by Lloyd’s and remitted directly to the IRS. These amounts are then charged to the personal accounts of the Names/Corporate Members in proportion to their participation in the relevant syndicates. The Company’s Corporate Members are subject to this arrangement but, as U.K. domiciled companies, will receive U.K. corporation tax credits for any U.S. income tax incurred up to the value of the equivalent U.K. corporation income tax charge on the U.S. income.

The income tax provision below includes income tax expense of $11.4 million, which relates to federal income taxes incurred from the transferred business to Assured Guaranty and attributed to the Assured Guaranty shares sold by the Company (See Note 4). The income tax expense results from a higher basis in the assets of the transferred subsidiaries for financial reporting purposes compared to the corresponding tax basis. In connection with its sale and pursuant to a tax allocation agreement, Assured Guaranty will make a tax election that will have the effect of increasing the tax basis of tangible and intangible assets to fair value. Future tax benefits that Assured Guaranty derives from this election will be payable to ACE and recognized by ACE when realized by Assured Guaranty.

ACE Prime Holdings and ACE Cap Re USA Holdings (through April 28, 2004), and their respective subsidiaries are subject to income taxes imposed by U.S. authorities and file consolidated U.S. income tax returns. Should the U.S. subsidiaries pay a dividend to the Company, withholding taxes will apply. Certain international operations of the Company are also subject to income taxes imposed by the jurisdictions in which they operate.

The Company is not subject to taxation other than as stated above. There can be no assurance that there will not be changes in applicable laws, regulations or treaties, which might require the Company to change the way it operates or become subject to taxation.

The income tax provision for the three and nine months ended September 30, 2004 and 2003 is as follows:

	Three Months Ended September 30				Nine Months Ended September 30
	2004		2003		2004		2003
	(in thousands of U.S. dollars)
Current tax expense	$	39,362	$	26,375	$	144,986	$	50,094
Deferred tax expense		13,796		40,571		159,096		157,451
Provision for income taxes	$	53,158	$	66,946	$	304,082	$	207,545

20

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The weighted average expected tax provision has been calculated using pre-tax accounting income (loss) in each jurisdiction multiplied by that jurisdiction’s applicable statutory tax rate. A reconciliation of the difference between the provision for income taxes and the expected tax provision at the weighted average tax rate for the three and nine months ended September 30, 2004 and 2003, is provided below.

	Three Months Ended September 30						Nine Months Ended September 30
	2004			2003			2004			2003
	(in thousands of U.S. dollars)
Expected tax provision at weighted average rate	$	53,430		$	64,090		$	265,442		$	202,144
Permanent differences
Tax-exempt interest		(1,421	)		(3,979	)		(8,269	)		(11,621	)
Sale of Assured Guaranty		—			—			35,011			—
Goodwill		—			525			3,957			1,575
Other		327			2,901			1,957			4,355
Net withholding taxes		822			3,409			5,984			11,092
Total provision for income taxes	$	53,158		$	66,946		$	304,082		$	207,545

The components of the net deferred tax asset at September 30, 2004 and December 31, 2003 are as follows:

	September 30 2004		December 31 2003
	(in thousands of U.S. dollars)
Deferred tax assets
Loss reserve discount	$	583,429	$	518,443
Unearned premium reserve		160,498		114,521
Foreign tax credits		322,833		204,052
Investments		128,593		92,898
Bad debts		143,216		152,619
Net operating loss carryforward		138,631		412,469
Other		132,353		120,203
Total deferred tax assets		1,609,553		1,615,205
Deferred tax liabilities
Deferred policy acquisition costs		138,284		163,199
Unrealized appreciation on investments		128,346		174,547
Unremitted foreign earnings		201,606		52,062
Total deferred tax liabilities		468,236		389,808
Valuation allowance		125,741		135,592
Net deferred tax asset	$	1,015,576	$	1,089,805

The valuation allowance of $126 million at September 30, 2004 and $136 million at December 31, 2003, reflects management’s assessment, based on available information, that it is more likely than not that a portion of the deferred tax asset will not be realized due to the inability of certain foreign subsidiaries to generate sufficient taxable income. Adjustments to the valuation allowances are made when there is a change in management’s assessment of the amount of deferred tax asset that is realizable. The change in the valuation allowance of $10 million relates to the business that transferred from the Company to Assured Guaranty (See Note 4).

At September 30, 2004, the Company has net operating loss carryforwards for U.S. federal income tax purposes of approximately $396 million. The net operating loss carryforwards are available to offset future U.S. federal taxable income and, if unutilized, will expire in the years 2018-2022.

17. Information provided in connection with outstanding debt of subsidiaries

The following tables present condensed consolidating financial information at September 30, 2004 and December 31, 2003 and for the three and nine months ended September 30, 2004 and 2003, for ACE Limited (the “Parent Guarantor”) and its “Subsidiary Issuers”. The Subsidiary Issuers are direct or indirect wholly-owned subsidiaries of the Parent Guarantor. At September 30, 2004, the Subsidiary Issuer was ACE INA Holdings, Inc and at December 31, 2003, the Subsidiary Issuers were ACE INA Holdings, Inc. and ACE Financial Services, Inc. (formerly Capital Re Corporation), parent company of Capital Re LLC. On July 12, 2004, ACE Financial Services, Inc. redeemed all $75 million of its trust preferred securities

21

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(See Note 11(c)). Investments in subsidiaries are accounted for by the Parent Guarantor and the Subsidiary Issuers under the equity method for purposes of the supplemental consolidating presentation. Earnings of subsidiaries are reflected in the Parent Guarantor’s investment accounts and earnings. The Parent Guarantor fully and unconditionally guarantees certain of the debt of the Subsidiary Issuers.

Condensed Consolidating Balance Sheet at September 30, 2004

(in thousands of U.S. dollars)

	ACE Limited (Parent Co. Guarantor)			ACE INA Holdings, Inc. (Subsidiary Issuer)			Other ACE Limited Subsidiaries and Eliminations (1)		Consolidating Adjustments (2)			ACE Limited Consolidated
Assets
Investments	$	715		$	12,941,542		$	14,441,290	$	—		$	27,383,547
Cash		6,824			333,539			285,436		—			625,799
Insurance and reinsurance balances receivable		—			2,549,534			829,391		—			3,378,925
Reinsurance recoverable		—			13,133,903			1,134,552		—			14,268,455
Goodwill		—			2,130,908			481,541		—			2,612,449
Investments in subsidiaries		10,067,701			—			—		(10,067,701	)		—
Due (to) from subsidiaries and affiliates, net		(43,805	)		(40,094	)		40,094		43,805			—
Other assets		85,529			5,050,142			1,050,837		—			6,186,508
Total assets	$	10,116,964		$	36,099,474		$	18,263,141	$	(10,023,896	)	$	54,455,683
Liabilities
Unpaid losses and loss expenses	$	—		$	21,429,706		$	8,173,604	$	—		$	29,603,310
Unearned premiums		—			4,800,763			1,664,827		—			6,465,590
Future policy benefits for life and annuity contracts		—			—			520,638		—			520,638
Short-term debt		—			145,648			—		—			145,648
Long-term debt		499,577			1,099,270			250,000		—			1,848,847
Trust preferred securities		—			412,373			—		—			412,373
Other liabilities		137,814			3,752,588			2,089,302		—			5,979,704
Total liabilities		637,391			31,640,348			12,698,371		—			44,976,110
Total shareholders’ equity		9,479,573			4,459,126			5,564,770		(10,023,896	)		9,479,573
Total liabilities and shareholders’ equity	$	10,116,964		$	36,099,474		$	18,263,141	$	(10,023,896	)	$	54,455,683

⁽¹⁾ Includes all other subsidiaries of ACE Limited and intercompany eliminations.

⁽²⁾ Includes ACE Limited parent company eliminations.

22

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Balance Sheet at December 31, 2003

(in thousands of U.S. dollars)

	ACE Limited (Parent Co. Guarantor)		ACE INA Holdings, Inc. (Subsidiary Issuer)			ACE Financial Services, Inc. (Subsidiary Issuer)			Other ACE Limited Subsidiaries and Eliminations (1)			Consolidating Adjustments (2)			ACE Limited Consolidated
Assets
Investments	$	16,903	$	10,351,235		$	1,184,969		$	11,893,092		$	—		$	23,446,199
Cash		27,260		167,667			23,112			343,611			—			561,650
Insurance and reinsurance balances receivable		—		2,015,186			28,433			792,997			—			2,836,616
Reinsurance recoverable		—		12,055,309			—			2,025,407			—			14,080,716
Goodwill		—		2,130,908			96,723			483,199			—			2,710,830
Investments in subsidiaries		9,056,845		—			152,000			(152,000	)		(9,056,845	)		—
Due (to) from subsidiaries and affiliates, net		349,617		(17,929	)		(46,819	)		64,748			(349,617	)		—
Other assets		53,430		4,526,075			181,774			1,155,503			—			5,916,782
Total assets	$	9,504,055	$	31,228,451		$	1,620,192		$	16,606,557		$	(9,406,462	)	$	49,552,793
Liabilities
Unpaid losses and loss expenses	$	—	$	18,996,890		$	110,259		$	8,047,689		$	—		$	27,154,838
Unearned premiums		—		3,757,093			389,027			1,904,668			—			6,050,788
Future policy benefits for life and annuity contracts		—		—			—			491,837			—			491,837
Short-term debt		—		545,727			—			—			—			545,727
Long-term debt		499,451		599,751			—			250,000			—			1,349,202
Trust preferred securities		—		400,000			75,000			—			—			475,000
Other liabilities		169,808		3,192,513			128,109			1,160,175			—			4,650,605
Total liabilities		669,259		27,491,974			702,395			11,854,369			—			40,717,997
Total shareholders’ equity		8,834,796		3,736,477			917,797			4,752,188			(9,406,462	)		8,834,796
Total liabilities and shareholders’ equity	$	9,504,055	$	31,228,451		$	1,620,192		$	16,606,557		$	(9,406,462	)	$	49,552,793

⁽¹⁾ Includes all other subsidiaries of ACE Limited and intercompany eliminations.

⁽²⁾ Includes ACE Limited parent company eliminations.

23

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statement of Operations

For the three months ended September 30, 2004

(in thousands of U.S. dollars)

	ACE Limited (Parent Co. Guarantor)			ACE INA Holdings, Inc. (Subsidiary Issuer)			Other ACE Limited Subsidiaries and Eliminations (1)			Consolidating Adjustments (2)			ACE Limited Consolidated
Net premiums written	$	—		$	1,723,536		$	1,045,014		$	—		$	2,768,550
Net premiums earned		—			1,671,290			1,181,994			—			2,853,284
Net investment income		106			127,281			124,009			—			251,396
Equity in earnings of subsidiaries		41,236			—			—			(41,236	)		—
Net realized gains (losses)		(4,214	)		3,942			(31,820	)		—			(32,092	)
Losses and loss expenses		—			1,197,854			1,036,193			—			2,234,047
Life and annuity benefits		—			—			48,447			—			48,447
Policy acquisition costs and administrative expenses		33,842			401,664			279,559			(3,354	)		711,711
Interest expense		5,906			36,589			7,032			(530	)		48,997
Other (income) expense		—			(4,933	)		(16,219	)		—			(21,152	)
Income tax expense (benefit)		—			58,651			(5,493	)		—			53,158
Net income (loss)	$	(2,620	)	$	112,688		$	(75,336	)	$	(37,352	)	$	(2,620	)

Condensed Consolidating Statement of Operations

For the three months ended September 30, 2003

(in thousands of U.S. dollars)

	ACE Limited (Parent Co. Guarantor)		ACE INA Holdings, Inc. (Subsidiary Issuer)		ACE Financial Services, Inc. (Subsidiary Issuer)		Other ACE Limited Subsidiaries and Eliminations (1)		Consolidating Adjustments (2)			ACE Limited Consolidated
Net premiums written	$	—	$	1,266,366	$	56,422	$	983,343	$	—		$	2,306,131
Net premiums earned		—		1,257,160		44,439		1,095,926		—			2,397,525
Net investment income		3,314		91,605		11,988		110,967		(3,185	)		214,689
Equity in earnings of subsidiaries		383,607		—		—		—		(383,607	)		—
Net realized gains (losses)		5,386		1,617		14,936		35,617		—			57,556
Losses and loss expenses		—		894,728		14,452		609,298		—			1,518,478
Life and annuity benefits		—		—		—		44,524		—			44,524
Policy acquisition costs and administrative expenses		29,170		317,396		17,045		275,910		(2,100	)		637,421
Interest expense		7,217		32,256		1,658		5,392		(2,175	)		44,348
Other (income) expense		—		360		—		2,728		—			3,088
Income tax expense		955		37,988		11,052		16,951		—			66,946
Net income	$	354,965	$	67,654	$	27,156	$	287,707	$	(382,517	)	$	354,965

⁽¹⁾ Includes all other subsidiaries of ACE Limited and intercompany eliminations.

⁽²⁾ Includes ACE Limited parent company eliminations.

24

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statement of Operations

For the nine months ended September 30, 2004

(in thousands of U.S. dollars)

	ACE Limited (Parent Co. Guarantor)		ACE INA Holdings, Inc. (Subsidiary Issuer)		Other ACE Limited Subsidiaries and Eliminations(1)		Consolidating Adjustments(2)			ACE Limited Consolidated
Net premiums written	$	—	$	5,183,185	$	3,690,462	$	—		$	8,873,647
Net premiums earned		—		4,593,678		3,647,961		—			8,241,639
Net investment income		4,802		344,722		381,107		(4,255	)		726,376
Equity in earnings of subsidiaries		949,268		—		—		(949,268	)		—
Net realized gains (losses)		8,687		31,185		27,499		—			67,371
Losses and loss expenses		—		3,081,485		2,419,435		—			5,500,920
Life and annuity benefits		—		—		134,569		—			134,569
Policy acquisition costs and administrative expenses		86,682		1,108,040		911,661		(9,281	)		2,097,102
Interest expense		18,151		104,074		20,373		(2,930	)		139,668
Other (income) expense		—		563		1,268		—			1,831
Income tax expense		710		233,539		69,833		—			304,082
Net income	$	857,214	$	441,884	$	499,428	$	(941,312	)	$	857,214

Condensed Consolidating Statement of Operations

For the nine months ended September 30, 2003

(in thousands of U.S. dollars)

	ACE Limited (Parent Co. Guarantor)			ACE INA Holdings, Inc. (Subsidiary Issuer)		ACE Financial Services, Inc. (Subsidiary Issuer)		Other ACE Limited Subsidiaries and Eliminations(1)		Consolidating Adjustments(2)			ACE Limited Consolidated
Net premiums written	$	—		$	3,846,762	$	209,166	$	3,586,248	$	—		$	7,642,176
Net premiums earned		—			3,360,354		131,942		3,283,353		—			6,775,649
Net investment income		15,110			266,834		34,791		330,865		(14,552	)		633,048
Equity in earnings of subsidiaries		1,072,991			—		—		—		(1,072,991	)		—
Net realized gains (losses)		(8,594	)		38,459		24,527		69,636		—			124,028
Losses and loss expenses		—			2,335,223		38,269		1,887,198		—			4,260,690
Life and annuity benefits		—			—		—		136,582		—			136,582
Policy acquisition costs and administrative expenses		75,521			859,336		53,605		831,445		(6,350	)		1,813,557
Interest expense		26,743			97,274		5,027		16,246		(12,332	)		132,958
Other (income) expense		—			1,809		—		6,707		—			8,516
Income tax expense		4,366			128,297		26,367		48,515		—			207,545
Net income	$	972,877		$	243,708	$	67,992	$	757,161	$	(1,068,861	)	$	972,877

⁽¹⁾ Includes all other subsidiaries of ACE Limited and intercompany eliminations.

⁽²⁾ Includes ACE Limited parent company eliminations.

25

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statement of Cash Flows

For the nine months ended September 30, 2004

(in thousands of U.S. dollars)

	ACE Limited (Parent Co. Guarantor)			ACE INA Holdings, Inc. (Subsidiary Issuer)			Other ACE Limited Subsidiaries and Eliminations (1)			ACE Limited Consolidated
Net cash flows from operating activities	$	(10,125	)	$	2,283,480		$	1,804,589		$	4,077,944
Cash flows from investing activities
Purchases of fixed maturities		(11,967	)		(8,385,109	)		(9,881,907	)		(18,278,983	)
Purchases of equity securities		—			(386,805	)		(451,283	)		(838,088	)
Sales of fixed maturities		28,019			5,828,967			8,051,379			13,908,365
Sales of equity securities		—			321,532			118,065			439,597
Net proceeds from the settlement of investment derivatives		8,857			—			5,055			13,912
Capitalization of subsidiaries		(637,051	)		365,187			271,864			—
Dividends received from subsidiaries		452,108			—			(452,108	)		—
Sale of subsidiary (net of cash sold)		—			—			953,164			953,164
Other		—			(13,447	)		(123,286	)		(136,733	)
Net cash flows used for investing activities	$	(160,034	)	$	(2,269,675	)	$	(1,509,057	)	$	(3,938,766	)
Cash flows from financing activities
Dividends paid on Ordinary Shares		(166,459	)		—			—			(166,459	)
Dividends paid on Preferred Shares		(33,638	)		—			—			(33,638	)
Net proceeds from (repayment of) short-term debt		—			(400,079	)		—			(400,079	)
Proceeds from long-term debt, net		—			499,565			—			499,565
Repayment of trust preferred securities		—			—			(75,000	)		(75,000	)
Advances to (from) affiliates		268,715			51,261			(319,976	)		—
Proceeds from exercise of options for Ordinary Shares		73,432			—			—			73,432
Proceeds from Ordinary Shares issued under ESPP		7,673			—			—			7,673
Net cash flows from (used for) financing activities	$	149,723		$	150,747		$	(394,976	)	$	(94,506	)
Effect of foreign currency rate changes on cash and cash equivalents	$	—		$	1,320		$	18,157		$	19,477
Net increase (decrease) in cash		(20,436	)		165,872			(81,287	)		64,149
Cash – beginning of period		27,260			167,667			366,723			561,650
Cash – end of period	$	6,824		$	333,539		$	285,436		$	625,799

⁽¹⁾ Includes all other subsidiaries of ACE Limited and intercompany eliminations.

26

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statement of Cash Flows

For the nine months ended September 30, 2003

(in thousands of U.S. dollars)

	ACE Limited (Parent Co. Guarantor)			ACE INA Holdings, Inc. (Subsidiary Issuer)			ACE Financial Services, Inc. (Subsidiary Issuer)			Other ACE Limited Subsidiaries and Eliminations (1)			ACE Limited Consolidated
Net cash flows from (used for) operating activities	$	(117,372	)	$	1,030,655		$	162,121		$	1,544,540		$	2,619,944
Cash flows from investing activities
Purchases of fixed maturities		(20,448	)		(4,616,326	)		(346,596	)		(9,506,999	)		(14,490,369	)
Purchases of equity securities		—			(44,076	)		—			(31,388	)		(75,464	)
Sales of fixed maturities		60,133			2,624,522			191,024			8,224,062			11,099,741
Sales of equity securities		—			56,364			—			51,509			107,873
Maturities of fixed maturities		—			—			3,000			91,612			94,612
Net proceeds from (payments made on) the settlement of investment derivatives		(9,222	)		—			—			27,724			18,502
Dividends received from		—			—			—			—			—
Capitalization of subsidiaries		(697,393	)		667,617			—			29,776			—
Dividends received from subsidiaries		306,000			—			—			(306,000	)		—
Other		—			(39,167	)		—			(21,302	)		(60,469	)
Net cash flows from (used for) investing activities	$	(360,930	)	$	(1,351,066	)	$	(152,572	)	$	(1,441,006	)	$	(3,305,574	)
Cash flows from financing activities
Dividends paid on Ordinary Shares		(145,462	)		—			—			—			(145,462	)
Dividends paid on Mezzanine equity		(9,773	)		—			—			—			(9,773	)
Dividends paid on Preferred shares		(11,337	)		—			—			—			(11,337	)
Net proceeds from issuance of preferred shares		556,887			—			—			—			556,887
Proceeds from short-term debt, net		—			40			—			—			40
Advances to (from) affiliates		66,256			—			—			(66,256	)		—
Proceeds from exercise of options for Ordinary Shares		36,504			—			—			—			36,504
Proceeds from Ordinary Shares issued under ESPP		7,344			—			—			—			7,344
Net cash flows from (used for) financing activities	$	500,419		$	40		$	—		$	(66,256	)	$	434,203
Effect of foreign currency rate changes on cash and cash equivalents	$	—		$	10,243		$	—		$	8,950		$	19,193
Net increase (decrease) in cash		22,117			(310,128	)		9,549			46,228			(232,234	)
Cash – beginning of period		2,150			478,161			4,438			178,606			663,355
Cash – end of period	$	24,267		$	168,033		$	13,987		$	224,834		$	431,121

⁽¹⁾ Includes all other subsidiaries of ACE Limited and intercompany eliminations.

27

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

18. Segment information

The Company operates through four business segments: Insurance – North American, Insurance – Overseas General, Global Reinsurance and Financial Services. These segments distribute their products through various forms of brokers and agencies. Insurance - North American, Insurance - Overseas General and Global Reinsurance utilize direct marketing programs to reach clients. Additionally, Insurance - North American has formed internet distribution channels for some of its products and Global Reinsurance and Financial Services have established relationships with reinsurance intermediaries.

The Insurance – North American segment includes the operations of ACE USA, ACE Canada and ACE Bermuda, excluding the financial solutions business in both the U.S. and Bermuda, which are included in the Financial Services segment. These operations provide a broad range of property and casualty insurance and reinsurance products, including excess liability, excess property, professional lines, aerospace, accident and health coverages and claim and risk management products and services, to a diverse group of commercial and non-commercial enterprises and consumers. Subsequent to the IPO, the title insurance business is included in the Insurance – North American segment. The operations of ACE USA also include the run-off operations, which include Brandywine, Commercial Insurance Services, residual market workers’ compensation business, pools and syndicates not attributable to a single business group, the run-off of open market facilities and the run-off results of various other smaller exited lines of business. Run-off operations do not actively sell insurance products, but are responsible for the management of existing policies and related claims.

The Insurance – Overseas General segment consists of ACE International and the insurance operations of ACE Global Markets. ACE International includes ACE INA’s network of indigenous insurance operations, which were acquired in 1999. The segment has four regions of operations: ACE Asia Pacific, ACE Far East, ACE Latin America and the ACE European Group, (which comprises ACE Europe, ACE INA UK Limited and the insurance operations of ACE Global Markets). ACE Global Markets provides funds at Lloyd’s to support underwriting by the Lloyd’s syndicates managed by Lloyd’s managing agencies which are owned by the Company (including for segment purposes Lloyd’s operations owned by ACE Financial Services). The reinsurance operation of ACE Global Markets is included in the Global Reinsurance segment. Companies within the Insurance – Overseas General segment write a variety of insurance products including property, casualty, professional lines (D&O and E&O), marine, energy, aviation, political risk, consumer-oriented products and A&H – principally being supplemental accident.

The Global Reinsurance segment comprises ACE Tempest Re Bermuda, ACE Tempest Re USA and ACE Tempest Re Europe. These subsidiaries provide property catastrophe, casualty and property reinsurance. Subsequent to the IPO, the trade credit business is included in the Global Reinsurance segment. Global Reinsurance also includes the operations of ACE Tempest Life Re. The principal business of ACE Tempest Life Re is to provide reinsurance coverage to other life insurance companies.

The Financial Services segment includes the financial solutions business in the U.S. and Bermuda and the Company’s share of Assured Guaranty’s earnings. Prior to the IPO of Assured Guaranty, the Financial Services segment included the financial guaranty business of ACE Guaranty Corp. and ACE Capital Re International. The financial results of the transferred business are included in the results of the Financial Services segment through April 28, 2004 (the date of the sale). Commencing May 1, 2004, the Company’s proportionate share of Assured Guaranty’s earnings is reflected in other (income) expenses in the Financial Services segment. The financial solutions business includes insurance and reinsurance solutions to complex risks that generally cannot be adequately addressed by the traditional insurance marketplace. It consists of securitization and risk trading, finite and structured risk products, and retroactive contracts in the form of loss portfolio transfers.

The following tables summarize the operations by segment for the three and nine months ended September 30, 2004 and 2003.

For segment reporting purposes, certain items have been presented in a different manner than in the consolidated financial statements.

28

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Statement of Operations by Segment

For the three months ended September 30, 2004

(in thousands of U.S. Dollars)

	Insurance – North American			Insurance - Overseas General		Global Reinsurance			Corporate and Other(1)			Consolidated Property & Casualty(2)			Financial Services			ACE Consolidated
Operations Data
Gross premiums written	$	2,218,697		$	1,291,964	$	342,541		$	—		$	3,853,202		$	68,088		$	3,921,290
Net premiums written		1,348,761			980,338		311,815			—			2,640,914			68,088			2,709,002
Net premiums earned		1,233,978			1,086,044		362,706			—			2,682,728			111,066			2,793,794
Losses and loss expenses		1,009,326			652,929		435,926			19,536			2,117,717			116,330			2,234,047
Policy acquisition costs		114,298			198,396		65,356			—			378,050			2,505			380,555
Administrative expenses		129,224			139,281		16,183			36,983			321,671			2,982			324,653
Underwriting income (loss)		(18,870	)		95,438		(154,759	)		(56,519	)		(134,710	)		(10,751	)		(145,461	)
Life
Gross premiums written		—			—		60,512			—			—			—			60,512
Net premiums written		—			—		59,548			—			—			—			59,548
Net premiums earned		—			—		59,490			—			—			—			59,490
Life and annuity benefits		—			—		48,447			—			—			—			48,447
Policy acquisition costs		—			—		5,527			—			—			—			5,527
Administrative expenses		—			—		976			—			—			—			976
Net investment income		—			—		8,089			—			—			—			8,089
Underwriting income		—			—		12,629			—			—			—			12,629
Net investment income		120,041			60,716		31,061			2,674			214,492			28,815			243,307
Other (income) expense		(2,452	)		3,064		277			(294	)		595			(21,747	)		(21,152	)
Net realized gains (losses)		9,138			1,711		(35,636	)		(6,429	)		(31,216	)		(876	)		(32,092	)
Interest expense		5,431			—		—			41,584			47,015			1,982			48,997
Income tax expense (benefit)		33,385			41,560		(1,865	)		(20,704	)		52,376			782			53,158
Net income (loss)	$	73,945		$	113,241	$	(145,117	)	$	(80,860	)	$	(51,420	)	$	36,171		$	(2,620	)

⁽¹⁾ Includes ACE Limited, ACE INA Holdings and intercompany eliminations.

⁽²⁾ Excludes life reinsurance business.

29

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Statement of Operations by Segment

For the three months ended September 30, 2003

(in thousands of U.S. Dollars)

	Insurance – North American		Insurance - Overseas General		Global Reinsurance			Corporate and Other(1)			Consolidated Property & Casualty(2)		Financial Services		ACE Consolidated
Operations Data
Gross premiums written	$	1,818,820	$	1,200,752	$	275,526		$	—		$	3,295,098	$	107,073	$	3,402,171
Net premiums written		1,064,794		871,405		217,400			—			2,153,599		105,742		2,259,341
Net premiums earned		990,321		881,942		273,560			—			2,145,823		205,277		2,351,100
Losses and loss expenses		711,987		528,673		133,762			—			1,374,422		144,056		1,518,478
Policy acquisition costs		94,873		170,444		55,975			—			321,292		17,850		339,142
Administrative expenses		103,209		120,595		15,485			31,485			270,774		21,811		292,585
Underwriting income (loss)		80,252		62,230		68,338			(31,485	)		179,335		21,560		200,895
Life
Gross premiums written		—		—		48,741			—			—		—		48,741
Net premiums written		—		—		46,790			—			—		—		46,790
Net premiums earned		—		—		46,425			—			—		—		46,425
Life and annuity benefits		—		—		44,524			—			—		—		44,524
Policy acquisition costs		—		—		4,924			—			—		—		4,924
Administrative expenses		—		—		770			—			—		—		770
Net investment income		—		—		9,357			—			—		—		9,357
Underwriting income		—		—		5,564			—			—		—		5,564
Net investment income (expense)		99,753		40,110		23,498			(6,343	)		157,018		48,314		205,332
Other (income) expense		697		2,414		(607	)		—			2,504		584		3,088
Net realized gains (losses)		7,893		4,382		10,306			5,386			27,967		29,589		57,556
Interest expense		6,913		1,150		—			34,649			42,712		1,636		44,348
Income tax expense (benefit)		47,268		13,258		2,720			(13,436	)		49,810		17,136		66,946
Net income (loss)	$	133,020	$	89,900	$	105,593		$	(53,655	)	$	269,294	$	80,107	$	354,965

⁽¹⁾ Includes ACE Limited, ACE INA Holdings and intercompany eliminations.

⁽²⁾ Excludes life reinsurance business.

30

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Statement of Operations by Segment

For the nine months ended September 30, 2004

(in thousands of U.S. Dollars)

	Insurance – North American		Insurance - Overseas General		Global Reinsurance			Corporate and Other(1)			Consolidated Property & Casualty(2)		Financial Services			ACE Consolidated
Operations Data
Gross premiums written	$	6,225,946	$	4,466,271	$	1,285,858		$	—		$	11,978,075	$	290,885		$	12,268,960
Net premiums written		3,890,164		3,283,452		1,244,985			—			8,418,601		289,561			8,708,162
Net premiums earned		3,419,361		3,195,710		1,037,663			—			7,652,734		423,960			8,076,694
Losses and loss expenses		2,542,679		1,878,773		769,120			19,536			5,210,108		290,812			5,500,920
Policy acquisition costs		326,244		578,415		203,270			—			1,107,929		22,428			1,130,357
Administrative expenses		347,265		416,151		50,232			95,965			909,613		37,502			947,115
Underwriting income (loss)		203,173		322,371		15,041			(115,501	)		425,084		73,218			498,302
Life
Gross premiums written		—		—		169,174			—			—		—			169,174
Net premiums written		—		—		165,485			—			—		—			165,485
Net premiums earned		—		—		164,945			—			—		—			164,945
Life and annuity benefits		—		—		134,569			—			—		—			134,569
Policy acquisition costs		—		—		16,414			—			—		—			16,414
Administrative expenses		—		—		3,216			—			—		—			3,216
Net investment income		—		—		24,443			—			—		—			24,443
Underwriting income		—		—		35,189			—			—		—			35,189
Net investment income		331,379		163,511		87,304			1,780			583,974		117,959			701,933
Other (income) expense		3,474		10,192		(150	)		(881	)		12,635		(10,804	)		1,831
Net realized gains (losses)		91,780		28,916		(33,266	)		8,687			96,117		(28,746	)		67,371
Interest expense		15,742		—		—			119,048			134,790		4,878			139,668
Income tax expense (benefit)		164,261		153,659		2,726			(48,355	)		272,291		31,791			304,082
Net income (loss)	$	442,855	$	350,947	$	101,692		$	(174,846	)	$	685,459	$	136,566		$	857,214

⁽¹⁾ Includes ACE Limited, ACE INA Holdings and intercompany eliminations.

⁽²⁾ Excludes life reinsurance business.

31

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Statement of Operations by Segment

For the nine months ended September 30, 2003

(in thousands of U.S. Dollars)

	Insurance – North American		Insurance - Overseas General			Global Reinsurance			Corporate and Other(1)			Consolidated Property & Casualty(2)		Financial Services			ACE Consolidated
Operations Data
Gross premiums written	$	5,131,214	$	3,850,494		$	1,086,710		$	—		$	10,068,418	$	756,474		$	10,824,892
Net premiums written		2,966,874		2,768,618			1,005,558			—			6,741,050		763,505			7,504,555
Net premiums earned		2,663,089		2,555,787			790,957			—			6,009,833		629,541			6,639,374
Losses and loss expenses		1,860,915		1,540,888			392,674			—			3,794,477		466,213			4,260,690
Policy acquisition costs		278,612		485,251			152,835			—			916,698		45,536			962,234
Administrative expenses		292,663		355,736			44,778			84,528			777,705		60,251			837,956
Underwriting income (loss)		230,899		173,912			200,670			(84,528	)		520,953		57,541			578,494
Life
Gross premiums written		—		—			143,702			—			—		—			143,702
Net premiums written		—		—			137,621			—			—		—			137,621
Net premiums earned		—		—			136,275			—			—		—			136,275
Life and annuity benefits		—		—			136,582			—			—		—			136,582
Policy acquisition costs		—		—			11,008			—			—		—			11,008
Administrative expenses		—		—			2,359			—			—		—			2,359
Net investment income		—		—			25,004			—			—		—			25,004
Underwriting income		—		—			11,330			—			—		—			11,330
Net investment income		306,121		113,107			63,293			(23,218	)		459,303		148,741			608,044
Other (income) expense		6,966		3,707			(1,893	)		—			8,780		(264	)		8,516
Net realized gains (losses)		14,751		(7,053	)		26,482			(8,594	)		25,586		98,442			124,028
Interest expense		21,813		2,016			72			103,850			127,751		5,207			132,958
Income tax expense (benefit)		128,774		55,898			9,689			(40,563	)		153,798		53,747			207,545
Net income (loss)	$	394,218	$	218,345		$	293,907		$	(179,627	)	$	715,513	$	246,034		$	972,877

⁽¹⁾ Includes ACE Limited, ACE INA Holdings and intercompany eliminations.

⁽²⁾ Excludes life reinsurance business.

Underwriting assets for property and casualty and financial services are reviewed in total by management for purposes of decision-making. The Company does not allocate assets to our segments. Assets are specifically identified for our life reinsurance operations and corporate holding companies, including ACE Limited and ACE INA Holdings.

The following table summarizes the identifiable assets at September 30, 2004 and December 31, 2003.

	September 30 2004		December 31 2003
	(in millions of U.S. dollars)
Life reinsurance	$	739	$	698
Corporate		2,232		2,483
All other		51,484		46,372
Total assets	$	54,455	$	49,553

32

ACE LIMITED AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following tables summarize the revenues of each segment by product offering for the three and nine months ended September 30, 2004 and 2003.

Net premiums earned by type of premium

Three Months Ended September 30, 2004

	Property & Casualty		Life, Accident & Health		Financial Guaranty		Financial Solutions		ACE Consolidated
	(in millions of U.S. dollars)
Insurance – North American	$	1,190	$	44	$	—	$	—	$	1,234
Insurance – Overseas General		840		246		—		—		1,086
Global Reinsurance		362		60		—		—		422
Financial Services		—		—		—		111		111
	$	2,392	$	350	$	—	$	111	$	2,853

Three Months Ended September 30, 2003

	Property & Casualty		Life, Accident & Health		Financial Guaranty		Financial Solutions		ACE Consolidated
	(in millions of U.S. dollars)
Insurance – North American	$	958	$	32	$	—	$	—	$	990
Insurance – Overseas General		682		200		—		—		882
Global Reinsurance		274		46		—		—		320
Financial Services		—		—		80		125		205
	$	1,914	$	278	$	80	$	125	$	2,397

Nine Months Ended September 30, 2004

	Property & Casualty		Life, Accident & Health		Financial Guaranty		Financial Solutions		ACE Consolidated
	(in millions of U.S. dollars)
Insurance – North American	$	3,289	$	130	$	—	$	—	$	3,419
Insurance – Overseas General		2,490		706		—		—		3,196
Global Reinsurance		1,037		165		—		—		1,202
Financial Services		—		—		104		320		424
	$	6,816	$	1,001	$	104	$	320	$	8,241

Nine Months Ended September 30, 2003

	Property & Casualty		Life, Accident & Health		Financial Guaranty		Financial Solutions		ACE Consolidated
	(in millions of U.S. dollars)
Insurance – North American	$	2,558	$	105	$	—	$	—	$	2,663
Insurance – Overseas General		1,989		567		—		—		2,556
Global Reinsurance		791		136		—		—		927
Financial Services		—		—		240		389		629
	$	5,338	$	808	$	240	$	389	$	6,775

33

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

The following is a discussion of our results of operations, financial condition, and liquidity and capital resources as of and for the three and nine months ended September 30, 2004. Our results of operations and cash flows for any interim period are not necessarily indicative of our results for the full year. This discussion should be read in conjunction with our Consolidated Financial Statements and related notes and our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2003.

Cautionary Statement Regarding Forward-Looking Information

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Any written or oral statements made by us or on our behalf may include forward-looking statements that reflect our current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks, uncertainties and assumptions about our business that could cause actual results to differ materially from such statements. These risks, uncertainties and assumptions (which are described in more detail elsewhere herein and in other documents we file with the Securities and Exchange Commission (SEC)) include but are not limited to:

• global political conditions, the occurrence of any terrorist attacks, including any nuclear, biological or chemical events, or the outbreak and effects of war, and possible business disruption or economic contraction that may result from such events;

• the ability to collect reinsurance recoverable, credit developments of reinsurers, and any delays with respect thereto;

• the occurrence of catastrophic events or other insured or reinsured events with a frequency or severity exceeding our estimates;

• actual loss experience from insured or reinsured events;

• the uncertainties of the loss-reserving and claims-settlement processes, including the difficulties associated with assessing environmental damage and asbestos-related latent injuries, the impact of aggregate-policy-coverage limits, and the impact of bankruptcy protection sought by various asbestos producers and other related businesses and the timing of loss payments;

• judicial decisions and rulings, new theories of liability, and legal tactics;

• the effects of public company bankruptcies and/or accounting restatements, as well as disclosures by and investigations of public companies relating to possible accounting irregularities, and other corporate governance issues, including the effects of such events on:

• the capital markets;

• the markets for directors and officers and errors and omissions insurance; and

• claims and litigation arising out of such disclosures or practices by other companies;

• the impact of the September 11 tragedy and its aftermath on our insureds, reinsureds, and on the insurance and reinsurance industry;

• uncertainties relating to governmental, legislative and regulatory policies, developments, investigations and treaties, which, among other things, could subject us to insurance regulation or taxation in additional jurisdictions or affect our current operations;

• the actual amount of new and renewal business, market acceptance of our products, and risks associated with the introduction of new products and services and entering new markets, including regulatory constraints on exit strategies;

• the competitive environment in which we operate, including trends in pricing or in policy terms and conditions, which may differ from our projections;

• actions that rating agencies may take from time to time, such as changes in our claims-paying, financial strength or credit ratings;

• developments in global financial markets, including changes in interest rates, stock markets and other financial markets, and foreign currency exchange rate fluctuations, which could affect our statement of operations, investment portfolio and financing plans;

• changing rates of inflation and other economic conditions;

• the amount of dividends received from subsidiaries;

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• loss of the services of any of our executive officers without suitable replacements being recruited in a reasonable time frame;

• the ability of technology to perform as anticipated; and

• management’s response to these factors.

The words “believe”, “anticipate”, “estimate”, “project”, “should”, “plan”, “expect”, “intend”, “hope”, “will likely result” or “will continue”, and variations thereof and similar expressions, identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

ACE Limited (ACE) is the Bermuda-based holding company of the ACE Group of Companies incorporated with limited liability under the Cayman Islands Companies Law. We created our business office in Bermuda in 1985 when we initially incorporated the Company and we continue to maintain our business office in Bermuda. Through our various operating subsidiaries, we provide a broad range of insurance and reinsurance products to insureds worldwide through operations in the U.S. and almost 50 other countries. Our long-term business strategy focuses on achieving underwriting income and providing value to our clients and shareholders through the utilization of our substantial capital base in the insurance and reinsurance markets.

As an insurance and reinsurance company, we generate gross revenues from two principal sources, premiums which are usually paid in advance of loss payments, and dividends and interest income earned on invested assets. Cash flow is primarily generated from premiums collected and investment income received less paid losses and loss expenses. Generally when an insurance company writing long-tail business grows, as ACE has over the last several years, its cash flows tend to be positive. ACE generated approximately $4 billion in positive operating cash flow in the nine months ended September 30, 2004, and cash and invested assets over this period increased $4 billion.

Invested assets are generally held in liquid, investment grade fixed income securities of relatively short duration. We also invest a small portion of our assets in less liquid or higher risk assets to achieve higher returns. Claims payments in any short-term period are highly unpredictable due to the random nature of loss events and the timing of claims awards or settlements. The value of investments held to pay future claims is subject to market forces such as the level of interest rates, stock market volatility and credit events such as corporate defaults. The actual cost of claims is also volatile based on factors such as loss trends, inflation rates, court awards and catastrophic events. We believe that our cash balances, our highly liquid investments, credit facilities and reinsurance protection provide sufficient liquidity to meet any unforeseen claim demands that might occur.

This was perhaps the most expensive quarter in the industry’s history for natural catastrophes. Industry loss estimates globally related to Hurricanes Charley, Frances, Ivan and Jeanne which struck the Caribbean and the U.S. and the typhoons which impacted Asia are estimated to be in excess of $30 billion (see section entitled “Catastrophe Charges” for financial impact on ACE). As a result, we expect that the rate environment will tighten – particularly in property and catastrophe related lines.

Insurance Industry Investigation and Related Matters

ACE has received subpoenas from the office of the New York Attorney General (the “NYAG”) and from other state attorneys general in connection with investigations of certain insurance industry practices (AG Investigations). On October 14, 2004, the NYAG filed a civil suit against Marsh & McLennan Companies Inc. (Marsh), alleging that certain Marsh business practices were fraudulent and violated antitrust and securities laws. ACE was not named as a defendant in the suit, although ACE was named as one of four insurance companies whose employees participated in the practices in question. In addition, an underwriter in an ACE insurance subsidiary has pleaded guilty to a misdemeanor based on these practices. ACE is cooperating and will continue to cooperate with the AG Investigations.

ACE is conducting its own internal investigation that will encompass the subjects raised by the NYAG. It is being conducted by a team from the firm of Debevoise & Plimpton LLP. The team is headed by former United States Attorney Mary Jo White and reports to management and directly to the Audit Committee of the Board of Directors. The Audit Committee of the Board of Directors has retained Cleary Gottlieb Steen & Hamilton, special outside counsel, to advise it in connection with these matters. We have terminated two employees, including our employee that has pleaded guilty to a misdemeanor, and have suspended three other employees as a result of our internal investigation.

Several purported shareholder class action lawsuits have been filed against ACE and certain of its present and former executive officers relating to certain of the practices being investigated by the AG Investigations. In addition, the plaintiffs in a pending lawsuit originally brought by policyholders against brokers has been amended by adding ACE and other carriers as additional defendants. ACE intends to vigorously defend against these actions.

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While ACE is not a party to any action brought by the NYAG or any other governmental authority, there can be no assurance that ACE will not be named in future actions. ACE cannot at this time estimate its potential costs related to these legal matters and accordingly no liability is being established in the Consolidated Financial Statements. In the opinion of ACE’s management, ACE’s ultimate liability for these matters is not likely to have a material adverse effect on ACE’s consolidated financial condition, although it is possible that the effect could be material to ACE’s consolidated results of operations for an individual reporting period.

Pursuant to the AG Investigations, ACE has decided to eliminate the use of placement service agreements (PSAs) that provide insurance brokers additional commissions based on the extent of premiums produced. Because the insurance brokers represent ACE’s largest distribution channel, the elimination of PSAs and any other changes in business practices of insurance brokers resulting from the AG Investigations could potentially impact ACE’s future premium volume although such effect, if any, cannot be quantified at this time.

In addition we are taking several new steps to monitor and improve our compliance with best underwriting practices, and avoid real or any appearance of conflicts of interest. These steps include:

• issuing new, detailed guidelines relating to the way we work with brokers and submits quotes. These guidelines will include a requirement that any commissions paid to brokers be reported to policyholders on the declarations page of all commercial policies.

• We will appoint a business practices compliance officer.

• An outside consulting firm is being retained to review and recommend enhancements to our business practice training, compliance and controls.

• Responsibilities of our Chief Ethics Officer, including serving as head of the ACE Ethics Committee, have now been assumed by our General Counsel.

Catastrophe Charges

During the current quarter, we incurred net catastrophe-related pre-tax charges of $479 million primarily associated with hurricanes which struck the Caribbean and the U.S. and, to a lesser extent, typhoons which impacted Asia (collectively referred to as catastrophe charges). The following table shows the impact of the catastrophe charges on each of our operating segments in the three and nine months ended September 30, 2004 (we incurred no catastrophe charges in the first half of 2004).

Catastrophe Loss Charges - By Event	Insurance - North American			Insurance - Overseas General			Global Reinsurance			Consolidated P&C			Financial Services			Total
	(in millions of U.S. dollars)
Gross loss	$	426		$	157		$	284		$	867		$	11		$	878
Net loss
Hurricane - Charley	$	31		$	—		$	65		$	96		$	—		$	96
Hurricane - Frances		22			6			48			76			5			81
Hurricane - Ivan		40			20			76			136			5			141
Hurricane - Jeanne		33			18			63			114			1			115
Typhoons		—			9			26			35			—			35
Total		126			53			278			457			11			468
Reinstatement premiums (earned) expensed		13			13			(15	)		11			—			11
Total impact before income tax		139			66			263			468			11			479
Income tax benefit		(41	)		(21	)		(11	)		(73	)		—			(73	)
Total impact after income tax	$	98		$	45		$	252		$	395		$	11		$	406
Effective tax rate		29	%		32	%		4	%		16	%		—	%		15	%

The above information is based on currently available information derived from modeling techniques, industry assessments of exposure and claims information obtained from our clients and brokers. Actual losses from these events may vary materially from our estimates due to the inherent uncertainties in making such determinations resulting from several factors, including the potential inaccuracies and inadequacies in the data provided by clients and brokers, the modeling techniques and the application of such techniques, as well as the high frequency of recent catastrophic events and the effects of any resultant demand surge on claims activity.

Sale of Financial and Mortgage Guaranty Business through Assured Guaranty Ltd.

On April 28, 2004, we completed the sale of 65.3 percent of our financial and mortgage guaranty reinsurance and insurance businesses (transferred business) through the initial public offering (IPO) of 49 million common shares of Assured Guaranty Ltd. (Assured Guaranty) at $18.00 per share. Assured Guaranty was incorporated in Bermuda in August 2003 for the sole purpose of becoming a holding company for our transferred business.

Pursuant to the completion of the IPO, we received proceeds, net of offering costs, of approximately $835 million and a return of capital of $200 million from Assured Guaranty, which were used to support our P&C business and strengthen our balance sheet capital position. The transaction resulted in a reduction of our shareholders’ equity of $61.1 million, representing the difference between net proceeds and the carrying value of 65.3 percent of Assured Guaranty at April 28, 2004 as well as taxes incurred on the transaction. The transaction also resulted in a pretax realized loss of $6.7 million and an after tax loss of $18.1 million. Additionally, in the second quarter we recognized compensation expense of $7.5 million in connection with the settlement of ACE stock awards held by the employees of Assured Guaranty. These expenses are reflected in “Other (income) expense” within the consolidated statement of operations.

Subsequent to the IPO, we beneficially own 26 million common shares, or 34.7 percent of Assured Guaranty’s outstanding common shares and accordingly, no longer consolidate our interest in the Assured Guaranty companies. Beginning April 29, 2004, we account for the retained interest under the equity method of accounting with the carrying value of our investment reflected in “Other investments” within the consolidated balance sheet and our proportionate share of earnings reflected in

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“Other (income) expense” within the consolidated statement of operations. For segment reporting purposes, our proportionate share of earnings is reflected in our Financial Services segment.

In connection with the IPO, we have entered into reinsurance agreements with Assured Guaranty in order to retain the insurance liabilities of certain run-off businesses, including trade credit and residual value insurance. At their inception, these contracts had no effect on our net income. Additionally, we have entered into a number of agreements with Assured Guaranty that will govern certain aspects of the relationship after this offering, including service agreements under which we will provide certain services to Assured Guaranty for a period of time.

See Note 4 of our Interim Consolidated Financial Statements for more information pertaining to this transaction.

Critical Accounting Estimates

Our Consolidated Financial Statements include amounts that, either by their nature or due to requirements of accounting principles generally accepted in the U.S. (GAAP), are determined using best estimates and assumptions. While we believe that the amounts included in our Consolidated Financial Statements reflect our best judgment, actual amounts could ultimately materially differ from those currently presented in our Consolidated Financial Statements. We believe the items that require the most subjective and complex estimates are:

• unpaid losses and loss expense reserves, including asbestos reserves;

• reinsurance recoverable, including our bad debt provision;

• impairments to the carrying value of our investment portfolio;

• the valuation of our deferred tax assets;

• the fair value of certain derivatives; and

• the valuation of goodwill.

We believe our accounting policies for these items are of critical importance to our Consolidated Financial Statements. The following discussion provides information regarding the estimates and assumptions required to arrive at our unpaid losses and loss expenses and should be read in conjunction with the section entitled, “Unpaid Losses and Loss Expenses”, included further within this document.

Unpaid losses and loss expenses

As an insurance and reinsurance company, we are required, under GAAP, to establish loss reserves for the estimated unpaid portion of the ultimate liability for losses and loss expenses under the terms of our policies and agreements with our insured and reinsured customers. These reserves include estimates for both claims that have been reported and those that have been incurred but not reported (IBNR), and include estimates of expenses associated with processing and settling these claims. At September 30, 2004, the unpaid losses and loss expense reserve was $29.6 billion. Our P&C loss reserves are not discounted. The process of establishing reserves for property and casualty (P&C) claims can be complex and is subject to considerable variability as it requires the use of informed estimates and judgments. These estimates and judgments are based on numerous factors, and may be revised as additional experience and other data become available and are reviewed, as new or improved methodologies are developed or as current laws change. We have actuarial staff in each of our operating segments who track insurance reserves and regularly evaluate the levels of loss reserves, taking into consideration factors that may impact the ultimate loss reserves. The potential for variation in loss reserves is impacted by numerous factors, which we explain below.

We estimate loss reserves for all insurance and reinsurance business we write. In most cases, we do not have all the necessary information to determine the ultimate settlement value for a claim at the time we are required to accrue for the loss. As a result, historical experience and other statistical information are used to estimate the ultimate cost of the loss, depending on the type of business. To determine carried reserves for a particular line of business, we may perform one or more reserving methods to estimate ultimate losses and loss expenses and use the results to select a single point estimate. These methods may include, but are not necessarily limited to, extrapolations of our historical reported and paid loss data, application of industry loss development patterns to our reported or paid losses, expected loss ratios developed by management, or historical industry loss ratios. Underlying judgments and assumptions that may be incorporated into these actuarial methods include, but are not necessarily limited to, adjustments to historical data used in models to exclude aberrations in claims data such as catastrophes that are typically analyzed separately, application of tail factors used to project ultimate claims from historical loss experience when there are several data points to use, adjustments to actuarial models and related data for known business changes, such as changes in claims covered under insurance contracts, and the effect of recent or pending litigation on future claim settlements.

The process of determining a single best estimate by product, when more than one estimate is developed in the course of the actuarial review, may be performed in several ways. However, the objective of such process, which is consistently applied to

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all product lines, is to determine a single best estimate that we believe represents a better estimate than any other. Such estimate is viewed to support the most likely outcome of ultimate loss settlements and determined based on several factors, including but not limited to, the extent of historical data and reliance on such data within the underlying reserve methodology, historical accuracy of loss estimates compared with actual loss experience for the product line or comparable product lines, and nature and extent of underlying assumptions. Depending on the facts and circumstances of each product line, the determination of a single best estimate may be accomplished by selecting a single point estimate when one estimate is determined to reflect a “better” estimate than the other point estimates or using a probability weighted average approach when more than one estimate is viewed to be reasonable. For example, an actuary may select loss reserves developed using an incurred loss development approach instead of a paid loss development approach as the best estimate when reported losses are viewed to be more credible indicators of ultimate loss estimates compared with paid losses. The actuaries’ evaluation process to determine a best estimate involves collaboration with underwriting, claims and finance departments and culminates with the input of the segment reserve committees which have the responsibility for finalizing and approving the point estimate to be used as our best estimate.

We do not calculate a range of loss reserve estimates. Actuarial ranges are not a true reflection of the potential volatility between loss reserves estimated at the balance sheet date and the ultimate settlement of losses. This is due to the fact that an actuarial range is developed based on known events as of the valuation date whereas actual volatility or prior period development has historically occurred in subsequent Consolidated Financial Statements in part from events and circumstances that were unknown as of the original valuation date.

While we perform annual loss reserve studies for all product lines, the timing of such studies vary throughout the year. Additionally, for each product line, we review the emergence of actual losses relative to expectations used in reserving each quarter. If warranted from findings in loss emergence tests, we will accelerate the timing of our product line reserve studies.

Since the ACE INA acquisition in 1999, our consolidated reserve for losses and loss expenses, net of reinsurance, reported at each year-end has developed by as much as ten percent (four percent excluding asbestos and environmental (A&E) reserve strengthening), although ultimate loss reserve development could be higher. See the “Analysis of Losses and Loss Expense Development” in our Annual Report on Form 10-K for the year ended December 31, 2003, for a summary of historical volatility between estimated loss reserves and ultimate loss settlements.

The “Unpaid Losses and Loss Expenses” section in our Annual Report on Form 10-K for the year ended December 31, 2003, includes a discussion of our reserve-setting procedures by segment. The following is a discussion of specific reserving considerations by type of claim:

Short-Tail Business, such as Property Coverages

Short-tail business describes lines of business for which losses are usually known and paid shortly after the loss actually occurs. This would include, for example, most property, personal accident, aviation hull and automobile physical damage policies that are written. Typically, there is less variability in these lines of business.

Long-Tail Business, such as Casualty Coverages

Long-tail business describes lines of business for which specific losses may not be known for some period and losses take much longer to emerge. This includes most casualty lines such as general liability, directors and officers liability (D&O) and workers’ compensation. Within our general insurance business, long-tail casualty business has been increasing and for the nine months ended September 30, 2004 comprises approximately 53 percent of net premiums earned. There are many factors contributing to the uncertainty and volatility of long-tail business. Among these are:

• Given the recent expansion of this business, historical experience is often too immature to place reliance upon for reserving purposes. Instead, particularly for newer lines of business, reserve methods are based on industry loss ratios or development patterns that reflect the nature and coverage of the underwritten business and its future development. For new or growing lines of business, actual loss experience is apt to differ from industry loss statistics that are based on averages as well as loss experience of previous underwriting years;

• The inherent uncertainty of the length of paid and reporting development patterns;

• The possibility of future litigation, legislative or judicial change that might impact future loss experience relative to prior loss experience relied upon in loss reserve analyses; and

• Loss reserve analyses typically require loss or other data be grouped by common characteristics in some manner. If data from two combined lines of business exhibit different characteristics, such as loss payment patterns, the credibility of the reserve estimate could be affected. Because casualty lines of business can have various intricacies in their underlying coverage, there is an inherent risk as to the homogeneity of the underlying data used in performing reserve analyses.

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The estimation of unpaid losses and loss expense reserves can also be affected by the layer at which a particular contract or set of contracts is written. In the case of direct insurance, where the insurer is taking on risk in the lower value end of the particular contract, the experience will tend to be more frequency driven. These lines of business allow for more traditional actuarial methods to be used in determining loss reserve levels, as it is customary to have more historical experience to rely upon. In the case of excess contracts, the experience will tend to be more of a severity nature, as only a significant loss will enter the layer. For structured or unique contracts, most common to the financial solutions business and to a lesser extent our reinsurance business, traditional actuarial methods for setting loss reserves (such as loss development triangles), have to be tempered with an analysis of each contract’s terms, original pricing information, subsequent internal and external analyses of the ongoing contracts, market exposures and history, and qualitative input from claims managers.

More information regarding our critical accounting estimates is included in the section entitled “Critical Accounting Estimates” in our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2003.

Results of Operations – Three and Nine Months Ended September 30, 2004 and 2003

The discussions that follow include tables, which show both our consolidated and segment operating results for the three and nine months ended September 30, 2004 and 2003. In presenting our segment operating results, we have discussed our performance with reference to underwriting results which is a non-GAAP measure. We consider this measure, which may be defined differently by other companies, to be important to an understanding of our overall results of operations. Underwriting results are calculated by subtracting losses and loss expenses, life and annuity benefits, policy acquisition costs and administrative expenses from net premiums earned. We use underwriting results and operating ratios to monitor the results of our operations without the impact of certain factors, including net investment income, other (income) expense, interest and income tax expense and net realized gains (losses). We believe the use of these measures enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business. Underwriting results should not be viewed as a substitute for measures determined in accordance with GAAP.

Consolidated Operating Results

	Three Months Ended September 30					Nine Months Ended September 30
	2004			2003		2004		2003
	(in millions of U.S. dollars)
Net premiums written	$	2,768		$	2,306	$	8,873	$	7,642
Net premiums earned		2,853			2,397		8,241		6,775
Net investment income		252			216		726		633
Net realized gains (loss)		(33	)		57		67		124
Total revenues	$	3,072		$	2,669	$	9,034	$	7,532
Losses and loss expenses		2,234			1,519		5,501		4,261
Life and annuity benefits		48			45		134		137
Policy acquisition costs		386			343		1,147		973
Administrative expenses		326			293		950		840
Interest expense		48			45		139		133
Other (income) expense		(21	)		3		2		8
Total expenses	$	3,021		$	2,247	$	7,873	$	6,352
Income before income tax		51			422		1,161		1,180
Income tax expense		54			67		304		207
Net income (loss)	$	(3	)	$	355	$	857	$	973

Net premiums written, which reflect the premiums we retain after purchasing reinsurance protection, increased 20 percent and 16 percent in the three and nine months ended September 30, 2004, respectively, compared with the same periods in 2003. Our P&C business reported increases in net premiums written of 23 percent and 25 percent in the three and nine months ended September 30, 2004, respectively. Adjusting for the appreciation of foreign currencies relative to the U.S. dollar, net premiums written in our P&C business increased 20 percent for the three and nine months ended September 30, 2004. The increase in our P&C business was primarily a result of our increased participation in the casualty market which has experienced favorable market conditions over the last several quarters, and to a lesser extent, an increase in personal accident business. Such increases were slightly offset

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by a decline in net premiums written in our Financial Services business primarily due to the de-consolidation of Assured Guaranty beginning April 28, 2004 (subsequent to the IPO).

The following table provides a consolidated breakdown of net premiums earned by line of business for the three and nine months ended September 30, 2004 and 2003.

	Three Months Ended September 30								Nine Months Ended September 30
	2004		% of total		2003		% of total		2004		% of total		2003		% of total
	(in millions of U.S. dollars)
Property and all Other	$	839	29	%	$	818	34	%	$	2,450	30	%	$	2,367	35	%
Casualty		1,553	55	%		1,096	46	%		4,366	53	%		2,971	44	%
Personal Accident (A&H)		290	10	%		232	10	%		836	10	%		672	10	%
Total P&C		2,682	94	%		2,146	90	%		7,652	93	%		6,010	89	%
Global Re – life		60	2	%		46	2	%		165	2	%		136	2	%
Financial services		111	4	%		205	8	%		424	5	%		629	9	%
Net premiums earned	$	2,853	100	%	$	2,397	100	%	$	8,241	100	%	$	6,775	100	%

Net premiums earned reflect the portion of net premiums written that were recorded as revenues for the period. Net premiums earned in our P&C business increased 25 percent and 27 percent (22 percent and 23 percent, adjusting for foreign exchange) in the three and nine months ended September 30, 2004, respectively, compared with the same periods in 2003. Our Financial Services business reported decreases of 46 percent and 33 percent in the three and nine months ended September 30, 2004, respectively. The change in net premiums earned for both the P&C and Financial Services businesses is consistent with the trend in net premiums written.

Net investment income increased 17 percent and 15 percent in the three and nine months ended September 30, 2004, respectively, compared with the same periods in 2003. This increase was due to positive operating cash flows during 2003 and 2004, partially offset by a reduction in our average investment yields due to the declining interest rate environment. See the section entitled “Net Investment Income” for more information.

The net realized loss in the current quarter and the decline in net realized gains in the nine months ended September 30, 2004, were primarily due to fair value adjustments of the derivative components of certain variable annuity products in our life reinsurance operation. See the section entitled “Net Realized Gains (Losses)” for more information.

In evaluating our P&C and Financial Services business we use the combined ratio, the loss and loss expense ratio, the policy acquisition cost ratio and the administrative expense ratio. We calculate these ratios by dividing the respective expense amounts of our P&C and Financial Services business by net premiums earned from our P&C and Financial Services business, respectively. We do not calculate these ratios for the life reinsurance business because they are not appropriate measures of the underwriting results for that business. The combined ratio is determined by adding the loss and loss expense ratio, the policy acquisition cost ratio and the administrative expense ratio. A combined ratio under 100 percent indicates underwriting income, and a combined ratio exceeding 100 percent indicates underwriting losses.

The following table shows our consolidated loss and loss expense ratio, policy acquisition ratio, administrative expense ratio and combined ratio for the three and nine months ended September 30, 2004 and 2003.

	Three Months Ended September 30				Nine Months Ended September 30
	2004		2003		2004		2003
Loss and loss expense ratio	80.0	%	64.6	%	68.1	%	64.2	%
Policy acquisition cost ratio	13.6	%	14.4	%	14.0	%	14.5	%
Administrative expense ratio	11.6	%	12.4	%	11.7	%	12.6	%
Combined ratio	105.2	%	91.4	%	93.8	%	91.3	%

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Our loss and loss expense ratio increased 15.4 percentage points and 3.9 percentage points in the three and nine months ended September 30, 2004, respectively, compared with the same periods in 2003. This increase was primarily due to the increased catastrophe charges in the current quarter and to a lesser extent, prior period development, and changes in business mix. The following table shows the impact of catastrophe charges and prior period development on our loss and loss expense ratio for the three and nine months ended September 30, 2004 and 2003.

	Three Months Ended September 30				Nine Months Ended September 30
	2004		2003		2004		2003
Loss and loss expense ratio, as reported	80.0	%	64.6	%	68.1	%	64.2	%
Catastrophe charges impact	17.0	%	1.8	%	5.9	%	1.2	%
Adverse (favorable) development impact	(0.1	)%	2.6	%	0.1	%	1.6	%
Loss and loss expense ratio, adjusted	63.1	%	60.2	%	62.1	%	61.4	%

Catastrophe charges in the nine months ended September 30, 2004, were $468 million, all occurring in the current quarter. For the three and nine months ended September 30, 2003, catastrophe charges were $42 million and $77 million, respectively. Also impacting our loss and loss expense ratio is prior period development. Prior period development represents the income effect from changes in loss estimates reported in previous calendar years and excludes the effect of losses recognized in connection with the earning of premium during the period. For purposes of analysis and disclosure, management views prior period development to be changes in the nominal value of loss estimates from period to period and excludes changes in loss estimates that do not arise from the emergence of claims, such as those related to interest or foreign currency. Accordingly, specific items excluded from prior period development are gains/losses related to foreign currency translation that affect both the valuation of unpaid losses and loss expenses and losses incurred, losses recognized from the early termination or commutation of reinsurance agreements that principally relate to the time value of money, and changes in the value of reinsurance business assumed reflected in losses incurred but principally related to the time value of money. For the three months ended September 30, 2004, we incurred favorable development of $1 million, comprised of $218 million of favorable development and $217 million of adverse development. This compares with adverse development of $60 million, comprised of $75 million of favorable development and $135 million of adverse development, in the same quarter in 2003. For the nine months ended September 30, 2004, we incurred net adverse development of $10 million. Our Segment Operating Results, below, contain explanations of prior period development recognized in our Consolidated Financial Statements.

Our losses and loss expenses in the current quarter also include $19 million in connection with the commutation of ceded reinsurance contracts that resulted from a differential between consideration received from reinsurers and the related reduction of reinsurance recoverables, principally related to the time value of money. Due to our initiatives to reduce reinsurance recoverable balances and thereby encourage such commutations, losses recognized in connection with the commutation of ceded reinsurance contracts are generally not considered when assessing segment performance and accordingly, are directly allocated to Corporate. The remaining increase in the loss and loss expense ratio in the three and nine months ended September 30, 2004, was principally the result of changes in business mix in our Global Reinsurance and Insurance – North American segments. Global Reinsurance has been growing its non-catastrophe P&C lines while Insurance – North American has been increasing its participation in casualty lines. See the section entitled “Segment Operating Results” for more information.

Our policy acquisition costs include commissions, premium taxes, underwriting and other costs that vary with, and are primarily related to, the production of premium. Increases in policy rates outpaced policy acquisition costs which caused our policy acquisition cost ratio to decrease in the three and nine months ended September 30, 2004, compared with the same periods in 2003. Administrative expenses include all other operating costs. Administrative expenses increased as a result of the growth in our business and also the depreciation of the U.S. Dollar which had the effect of increasing administrative expenses by $29 million or three percent in the nine months ended September 30, 2004, respectively. The administrative expense ratio improved in the current periods due to the increase in net premiums earned and also due to continued expense reduction initiatives, which began in 2003.

Our issuance of $500 million of ACE INA 5.875 percent senior notes during the second quarter of 2004 caused our interest expense to be temporarily higher in the current quarter. We repaid the $400 million of ACE INA 8.2 percent notes on August 15, 2004. Other (income) expense includes equity in net income of subsidiary from Assured Guaranty – see the section entitled “Other Income and Expense” for more information.

The current quarter decrease in income tax expense is a result of the decline in taxable net income caused by the catastrophe charges. However, due to the fact that almost two-thirds of the catastrophe charges were reported in lower-tax jurisdictions, our income tax expense did not decrease at a rate consistent with the decline in our current quarter net income. As a result, the effective tax rate on net income for the quarter was 105 percent compared with 16 percent in the same quarter in 2003. For the nine months ended September 30, 2004, income tax expense increased primarily due to the increase in taxable net income in the first half of 2004. The increased profitability for Insurance—Overseas General and Insurance – North American added $134 million to income tax expense in the nine months ended September 30, 2004. Additionally, in the second quarter, we incurred approximately $11 million in income tax expense related to federal income taxes from the transfer of our U.S. financial and mortgage guaranty operations to Assured Guaranty and attributed to the sale of our Assured Guaranty shares. These increases, in addition to incurring the bulk of the catastrophe charges in our lower-tax jurisdictions, caused our effective tax rate on net income to increase to 26 percent in the nine months ended September 30, 2004, compared with 18 percent in the same period in 2003. Our effective tax rate is dependent upon the mix of earnings from different jurisdictions with various tax rates; a change in the geographic mix of earnings would change the effective tax rate.

Net income declined $358 million in the three months ended September 30, 2004, primarily due to the significant current quarter catastrophe charges. These catastrophe charges also caused our net income to decline 12 percent in the nine months

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ended September 30, 2004. The appreciation of foreign currencies relative to the U.S. Dollar added $9 million and $30 million to our net income in the three and nine months ended September 30, 2004, respectively.

Segment Operating Results – Three and Nine Months Ended September 30, 2004 and 2003

Insurance - North American

The Insurance – North American segment comprises our P&C insurance operations in the U.S., Bermuda and Canada. This segment writes a variety of insurance products including property, liability (general liability and workers’ compensation), professional lines (directors and officers (D&O), errors and omissions (E&O) and medical risk coverages), commercial and recreational marine, program business, accident and health (A&H) - principally being personal accident, aerospace, consumer-oriented products and other specialty lines.

	Three Months Ended September 30						Nine Months Ended September 30
	2004			2003			2004			2003
	(in millions of U.S. dollars)
Net premiums written	$	1,349		$	1,065		$	3,890		$	2,967
Net premiums earned		1,234			990			3,419			2,663
Losses and loss expenses		1,010			712			2,543			1,861
Policy acquisition costs		114			95			326			279
Administrative expenses		129			103			347			293
Underwriting income (loss)	$	(19	)	$	80		$	203		$	230
Net investment income		120			98			331			300
Other (income) expense		(2	)		—			4			6
Interest expense		5			5			15			16
Income tax expense		33			48			164			129
Net realized gains (losses)		9			8			92			15
Net income	$	74		$	133		$	443		$	394
Loss and loss expense ratio		81.8	%		71.9	%		74.4	%		69.9	%
Policy acquisition cost ratio		9.3	%		9.6	%		9.5	%		10.4	%
Administrative expense ratio		10.5	%		10.4	%		10.2	%		11.0	%
Combined ratio		101.6	%		91.9	%		94.1	%		91.3	%

Net premiums written for the Insurance – North American segment increased 27 percent and 31 percent in the three and nine months ended September 30, 2004, respectively, compared with the same periods in 2003. The increase relates primarily to growth in casualty business. Over the last several quarters, Insurance – North American has been increasing casualty lines of business and decreasing property lines of business as rates, terms and conditions have been more favorable for casualty business relative to property business. Additionally, Insurance – North American’s retention ratio increased to 61 percent for the nine months ended September 30, 2004, compared with 59 percent for the same period in 2003. Insurance – North American has been increasing its retention, particularly on casualty business, in order to take advantage of improved market conditions for rates and terms and to reduce reliance on reinsurance.

The following two tables provide a line of business and entity/divisional breakdown of Insurance – North American’s net premiums earned for the three and nine months ended September 30, 2004 and 2003.

	Three Months Ended September 30								Nine Months Ended September 30
	2004		% of total		2003		% of total		2004		% of total		2003		% of total
	(in millions of U.S. dollars)
Property and all Other	$	318	25	%	$	394	40	%	$	945	28	%	$	1,057	40	%
Casualty		872	71	%		562	57	%		2,344	69	%		1,501	56	%
Personal Accident (A&H)		44	4	%		32	3	%		130	3	%		105	4	%
Net premiums earned	$	1,234	100	%	$	990	100	%	$	3,419	100	%	$	2,663	100	%

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	Three Months Ended September 30				Nine Months Ended September 30
	2004		2003		2004		2003
	(in millions of U.S. dollars)
ACE USA	$	800	$	585	$	2,192	$	1,581
ACE Westchester Specialty		332		302		912		783
ACE Bermuda		102		103		315		299
Net premiums earned	$	1,234	$	990	$	3,419	$	2,663

ACE USA, which includes ACE operations in Canada, provides a broad array of products and services to corporate and consumer clients throughout the U.S. and Canada through licensed insurance companies. Distribution channels include retail brokers, agents, managing general agents, and managing general underwriters. ACE USA’s net premiums earned increased 37 percent and 39 percent in the three and nine months ended September 30, 2004, respectively, compared with the same periods in 2003. ACE USA’s growth in the current periods was driven by casualty business, where submission levels have been strong. In 2004, casualty lines continue to experience generally more favorable policy terms and conditions and a more favorable rate environment than property business. As a result, ACE USA has experienced increased opportunity to write these lines at adequate margins. ACE USA reported solid growth in excess workers’ compensation (primarily high deductible policies in national accounts business) due to new business and rate increases. ACE USA also experienced strong demand for small business workers’ compensation coverage and umbrella excess coverage as well as professional liability (mainly D&O) and medical coverages. Additionally, net premiums earned benefited from increased retention – ACE USA’s retention ratio increased to 66 percent for the nine months ended September 30, 2004, compared with 58 percent for the same period in 2003.

ACE Westchester Specialty specializes in the wholesale distribution of excess and surplus lines property, inland marine and casualty coverage and products. ACE Westchester Specialty also provides coverage for agriculture business and specialty programs through its Program division. ACE Westchester Specialty’s net premiums earned increased 10 percent and 16 percent in the three and nine months ended September 30, 2004, respectively, compared with the same periods in 2003. This increase primarily reflects higher casualty writings as well as increased agriculture coverages, reflecting new business growth. Additionally, due to lower reinsurance costs and the growth in casualty business (which we have been retaining more of due to favorable market conditions), the retention ratio for ACE Westchester Specialty has increased to 53 percent for the nine months ended September 30, 2004, compared with 48 percent for the same period in 2003.

ACE Bermuda, which specializes in providing professional lines and excess liability coverage, reported flat net premiums earned in the current quarter and an increase of five percent in the nine months ended September 30, 2004. ACE Bermuda reported growth in excess liability in the current quarter, which was offset by softening rates on professional lines and excess property business. ACE Bermuda’s moderate increase in net premiums earned in the nine months ended September 30, 2004, was primarily due to growth in excess liability and professional lines business on the strength of increased rates and new business primarily written in 2003. As can be seen in the current quarter, rate increases for these lines have slowed in 2004 and in some lines rates are declining, which will impact net premiums earned in future quarters.

The loss and loss expense ratio increased 9.9 percentage points and 4.5 percentage points in the three and nine months ended September 30, 2004, respectively, compared with the same periods in 2003. This increase was primarily due to the increased catastrophe charges in the current quarter and to a lesser extent, prior period development. The following table shows the impact of catastrophe charges and prior period development on our loss and loss expense ratio for the three and nine months ended September 30, 2004 and 2003.

	Three Months Ended September 30				Nine Months Ended September 30
	2004		2003		2004		2003
Loss and loss expense ratio, as reported	81.8	%	71.9	%	74.4	%	69.9	%
Catastrophe charges impact	10.9	%	2.0	%	4.0	%	0.8	%
Adverse prior period development impact	3.4	%	3.0	%	2.9	%	2.9	%
Loss and loss expense ratio, adjusted	67.5	%	66.9	%	67.5	%	66.2	%

Catastrophe charges in the nine months ended September 30, 2004, and 2003, were $126 million and $20 million, respectively, all occurring in the third quarter of each year. For the three months ended September 30, 2004, the adverse prior period development was $42 million, representing 0.6 percent of $7.2 billion of the segment’s unpaid loss and loss expense reserves at the beginning of the period. The overall adverse experience was the net result of several underlying favorable and adverse movements, the most significant of which are as follows. There was adverse development of approximately $35 million (accident years 2002 and prior) as a consequence of an increase in case reserves following updated claim information received during the quarter for two excess professional lines policies written by ACE Bermuda. In addition, there was approximately $69 million in adverse development in our domestic US run-off operations following completion in the quarter of reserve studies which reflected higher than anticipated actual loss experience.

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The major lines of business impacted were an open market facility writing specialty business ($28 million across accident years 1998-2002), a middle market block of business ($21 million in accident years 2001 and prior), and a block of agents’ errors and omissions business ($20 million in accident years 2000 and prior). The aviation business experienced approximately $24 million of adverse development spread across accident year 2003 and prior whilst the block of guaranteed cost workers compensation business experienced $10 million of adverse development following the completion of periodic reserve studies in the quarter. The held reserves also experienced favorable development. On certain lines offering short-tail coverage there was $83 million of favorable experience arising from lower than anticipated claims experience involving accident years 2002 and 2003. Favorable development of $16 million on accident years 2002 and prior was also experienced on the excess liability book where the actuarial assumptions were revised this quarter to reflect favorable claims emergence relative to expectations. While we perform annual loss reserve studies for all product lines, the timing of such studies vary throughout the year. Additionally, for each product line, we review the emergence of actual losses relative to expectations used in reserving each quarter. If warranted from findings in loss emergence tests, we will accelerate the timing of our product line reserve studies.

The remaining increase in the loss and loss expense ratio of 0.6 percentage points and 1.3 percentage points in the three and nine months ended September 30, 2004, was principally the result of casualty lines comprising a higher proportion of net premiums earned in 2004 relative to 2003. Due to their longer claim pay-out duration, casualty lines exhibit a higher loss and loss expense ratio relative to other types of business.

The policy acquisition cost ratio decreased in the current periods because the rate increases in policy rates outpaced the rate of increase in policy acquisition costs, such as premium taxes and commission expenses, particularly on casualty lines which constitute a higher proportion of our business in the current periods. Administrative expenses increased 25 percent and 18 percent in the three and nine months ended September 30, 2004, respectively, primarily due to the increased costs associated with servicing the growth in Insurance – North American’s product lines. The administrative expense ratio declined in the nine months ended September 30, 2004, due to an increase in net premiums earned that outpaced the growth in expenses.

Insurance – North American reported declines in underwriting income in the current periods primarily due to higher loss and loss expense ratios, partially offset by increases in net premiums earned.

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Insurance - Overseas General

The Insurance – Overseas General segment comprises ACE International, our network of indigenous insurance operations, and the insurance operations of ACE Global Markets. The Insurance – Overseas General segment writes a variety of insurance products including property, casualty, professional lines (D&O and E&O), marine, energy, aviation, political risk, consumer-oriented products and A&H – principally being personal accident.

	Three Months Ended September 30						Nine Months Ended September 30
	2004			2003			2004			2003
	(in millions of U.S. dollars)
Net premiums written	$	980		$	872		$	3,283		$	2,769
Net premiums earned		1,086			882			3,196			2,556
Losses and loss expenses		653			529			1,879			1,541
Policy acquisition costs		199			170			579			485
Administrative expenses		139			121			416			356
Underwriting income	$	95		$	62		$	322		$	174
Net investment income		61			39			164			111
Other (income) expense		3			3			10			4
Income tax expense		42			12			154			55
Net realized gains (losses)		2			4			29			(7	)
Net income	$	113		$	90		$	351		$	219
Loss and loss expense ratio		60.1	%		59.9	%		58.8	%		60.3	%
Policy acquisition cost ratio		18.3	%		19.3	%		18.1	%		19.0	%
Administrative expense ratio		12.8	%		13.7	%		13.0	%		13.9	%
Combined ratio		91.2	%		92.9	%		89.9	%		93.2	%

Insurance – Overseas General’s net premiums written increased 12 percent and 19 percent (6 percent and 9 percent adjusting for foreign exchange) in the three and nine months ended September 30, 2004, respectively, compared with the same periods in 2003. This increase was primarily due to growth at ACE International in the current periods. Additionally, Insurance – Overseas General’s current period net premiums written benefited from higher retention of gross premiums written. The retention ratio was 74 percent for the nine months ended September 30, 2004 compared with 72 percent in the same period in 2003.

ACE International’s P&C operations are organized geographically along product lines. Property insurance products include traditional commercial fire coverage as well as energy industry-related coverages. Principal casualty products are commercial general liability and liability coverage for multinational organizations. Through our professional lines, we provide D&O and professional indemnity coverages for medium to large clients. The A&H insurance operations provide principally accident coverage to individuals and groups outside of U.S. insurance markets. ACE International’s net premiums written increased 20 percent and 25 percent in the three and nine months ended September 30, 2004, respectively (12 percent adjusting for foreign exchange). Reporting higher premium production across most regions, ACE International recorded net premiums written of $744 million and $2.5 billion in the three and nine months ended September 30, 2004, respectively. ACE International’s increase in net premiums written in the current periods was primarily driven by ACE Europe and ACE Asia Pacific, as both regions reported double-digit growth in P&C and A&H business, due to rising rates and new business. Additionally, ACE Latin America reported growth in A&H business, a result of successful marketing campaigns in Mexico and Brazil.

ACE Global Markets primarily underwrites P&C insurance through Lloyd’s Syndicate 2488 and ACE European Group Limited (formerly ACE INA UK Limited). The main lines of business include aviation, property, energy, professional lines, marine, political risk and A&H. ACE Global Markets’ net premiums written declined seven percent to $236 million in the current quarter primarily due to soft market conditions within the property and energy lines. In the nine months ended September 30, 2004, ACE Global Markets reported an increase in net premiums written of two percent to $823 million. Rate increases continue to be obtained on professional lines, A&H, aviation and marine business, however the professional lines market is becoming less favorable and property and energy lines are experiencing rate reductions of approximately 5 and 12 percent, respectively. The recent hurricane activity in the Caribbean and U.S. may have an impact on property rates going forward.

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The following two tables provide a line of business and entity/divisional breakdown of Insurance – Overseas General’s net premiums earned for the current periods.

	Three Months Ended September 30								Nine Months Ended September 30
	2004		% of total		2003		% of total		2004		% of total		2003		% of total
	(in millions of U.S. dollars)
Property and all Other	$	327	30	%	$	258	29	%	$	972	30	%	$	792	31	%
Casualty		513	47	%		424	48	%		1,518	48	%		1,197	47	%
Personal Accident (A&H)		246	23	%		200	23	%		706	22	%		567	22	%
Net premiums earned	$	1,086	100	%	$	882	100	%	$	3,196	100	%	$	2,556	100	%

	Three Months Ended September 30				Nine Months Ended September 30
	2004		2003		2004		2003
	(in millions of U.S. dollars)
ACE Europe	$	477	$	375	$	1,435	$	1,059
ACE Asia Pacific		129		99		358		271
ACE Far East		98		89		288		266
ACE Latin America		88		75		255		212
ACE International		792		638		2,336		1,808
ACE Global Markets		294		244		860		748
Net premiums earned	$	1,086	$	882	$	3,196	$	2,556

Insurance – Overseas General increased net premiums earned 23 percent and 25 percent in the three and nine months ended September 30, 2004, respectively, compared with the same periods in 2003. Adjusting for the devaluation of the U.S. dollar, Insurance – Overseas General’s net premiums earned increased 15 percent and 16 percent in the three and nine months ended September 30, 2004, respectively. Consistent with the trend in net premiums written, the major driver of growth was ACE Europe which contributed close to 60 percent of Insurance – Overseas General’s increase in net premiums earned in the nine months ended September 30, 2004. ACE Europe has been experiencing several quarters of increased production across most of its product offerings and has also been bolstered by the appreciation of foreign currencies against the U.S. dollar.

The loss and loss expense ratio increased 0.2 percentage points in the three months ended September 30, 2004, compared with the same quarter in 2003, primarily due to increased catastrophe charges, partially offset by improved prior period development, compared with the same quarter in 2003. For the nine months ended September 30, 2004, our loss and loss expense ratio decreased 1.5 percentage points, primarily due to favorable development, partially offset by increased catastrophe charges. The following table shows the impact of catastrophe charges and prior period development on our loss and loss expense ratio for the three and nine months ended September 30, 2004 and 2003.

	Three Months Ended September 30				Nine Months Ended September 30
	2004		2003		2004		2003
Loss and loss expense ratio, as reported	60.1	%	59.9	%	58.8	%	60.3	%
Catastrophe charges impact	5.5	%	1.1	%	1.5	%	0.4	%
Adverse (favorable) development impact	(0.7	)%	4.0	%	(0.6	)%	1.8	%
Loss and loss expense ratio, adjusted	55.3	%	54.8	%	57.9	%	58.1	%

Catastrophe charges in the nine months ended September 30, 2004, and 2003, were $53 million and $10 million, respectively, all occurring in the third quarter of each year. For the three months ended September 30, 2004, there was favorable prior period development of $8 million which represented 0.2 percent of the $4 billion of the segment’s unpaid loss and loss expense reserves at the beginning of the period. The short-tail property and fire lines showed favorable development of $21 million (primarily from accident year 2003) due to lower than anticipated reporting of claims in the current quarter. This was offset by adverse development of $11 million on European marine business (accident years 2001 to 2003) due to the change in reserving assumptions to lengthen loss development factors given a combination of actual claims emergence in the quarter and a shift in the manner in which we participate in much of this business from primary or lead underwriter to secondary underwriter.

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For the three months ended September 30, 2003, Overseas General incurred adverse prior period development of $35 million. The 2003 development is primarily attributed to ACE International’s casualty and consumer lines.

The policy acquisition cost ratio for Insurance – Overseas General improved in the three and nine months ended September 30, 2004, compared with the same periods in 2003. The improvement reflects underwriters’ continued focus on reducing commission charges, with improvements seen particularly within ACE Global Market’s financial lines and A&H divisions, together with changes in business mix. Insurance – Overseas General’s administrative expenses increased 15 percent and 17 percent in the three and nine months ended September 30, 2004, primarily due to the depreciation of the U.S. dollar and increased staff costs at ACE Europe and ACE Asia Pacific. The administrative expense ratio for Insurance – Overseas General improved due to the increase in net premiums earned coupled with a reduction in Lloyd’s charges within ACE Global Markets.

Underwriting income increased in the three and nine months ended September 30, 2004, primarily due to the increase in net premiums earned, combined with stable loss and loss expense ratios over the same periods.

Global Reinsurance

The Global Reinsurance segment comprises ACE Tempest Re Bermuda, ACE Tempest Re USA, ACE Tempest Re Europe, and ACE Tempest Life Re (ACE Life Re). ACE Life Re is our Bermuda-based life reinsurance operation and is addressed separately.

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Property and Casualty Reinsurance

	Three Months Ended September 30						Nine Months Ended September 30
	2004			2003			2004			2003
	(in millions of U.S. dollars)
Net premiums written	$	312		$	217		$	1,245		$	1,005
Net premiums earned		362			274			1,037			791
Losses and loss expenses		436			134			769			393
Policy acquisition costs		65			56			203			153
Administrative expenses		16			16			50			45
Underwriting income (loss)		(155	)		68			15			200
Net investment income		31			23			87			63
Other (income) expense		—			(1	)		—			(2	)
Income tax expense (benefit)		(1	)		3			3			9
Net realized gains (losses)		2			9			14			36
Net income	$	(121	)	$	98		$	113		$	292
Loss and loss expense ratio		120.2	%		48.9	%		74.1	%		49.6	%
Policy acquisition cost ratio		18.0	%		20.4	%		19.6	%		19.3	%
Administrative expense ratio		4.5	%		5.7	%		4.8	%		5.7	%
Combined ratio		142.7	%		75.0	%		98.5	%		74.6	%

Global Reinsurance’s net premiums written increased 44 percent and 24 percent in the three and nine months ended September 30, 2004, respectively, compared with the same periods in 2003. The growth in net premiums written during the current quarter was mainly a result of higher gross premiums written at ACE Tempest Re USA and ACE Tempest Re Europe, $15 million in reinstatement premiums related to the current quarter’s catastrophe charges and higher retention of gross premiums written. Global Reinsurance’s retention ratio was 91 percent in the current quarter, compared with 79 percent in the same quarter in 2003. The majority of the current quarter’s growth was in non-catastrophe P&C lines, while the amount of reinsurance sold for specific catastrophe risks was lower compared with the same quarter in 2003.

The following two tables provide a line of business and entity/divisional breakdown of Global Reinsurance’s net premiums earned for the three and nine months ended September 30, 2004 and 2003.

	Three Months Ended September 30								Nine Months Ended September 30
	2004		% of total		2003		% of total		2004		% of total		2003		% of total
	(in millions of U.S. dollars)
Property and all Other	$	105	29	%	$	75	27	%	$	281	27	%	$	226	28	%
Casualty		168	46	%		110	40	%		504	49	%		272	34	%
Property catastrophe		89	25	%		89	33	%		252	24	%		293	38	%
Net premiums earned	$	362	100	%	$	274	100	%	$	1,037	100	%	$	791	100	%

	Three Months Ended September 30				Nine Months Ended September 30
	2004		2003		2004		2003
	(in millions of U.S. dollars)
ACE Tempest Re Europe	$	77	$	55	$	227	$	187
ACE Tempest Re USA		194		127		552		325
ACE Tempest Re Bermuda		91		92		258		279
Net premiums earned	$	362	$	274	$	1,037	$	791

Net premiums earned increased 32 percent and 31 percent in the three and nine months ended September 30, 2004, respectively, compared with the same periods in 2003. This increase was driven by growth in non-catastrophe P&C business

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at ACE Tempest Re USA and ACE Tempest Re Europe. Non-catastrophe P&C business has increased steadily over the last several quarters and comprised 76 percent of the net premiums earned in the nine months ended September 30, 2004.

ACE Tempest Re USA, which focuses on writing property per risk and casualty reinsurance, reported a 53 percent and 70 percent increase in net premiums earned in the three and nine months ended September 30, 2004, respectively, compared with the same periods in 2003, primarily due to increased casualty business written and higher renewal rates. ACE Tempest Re Europe, which writes most lines of traditional and non-traditional P&C lines with an orientation towards specialty and short-tail products reported a 40 percent and 21 percent increase in net premiums earned in the three and nine months ended September 30, 2004, respectively. This increase was primarily due to significantly higher casualty writings, and increased retention of business in the current quarter. ACE Tempest Re Bermuda, which principally provides property catastrophe reinsurance globally to insurers of commercial and personal property, reported a one percent and eight percent decrease in net premiums earned in the three and nine months ended September 30, 2004, respectively. ACE Tempest Re Bermuda has been experiencing downward pressure on premium production due to the market-wide decline in rates on property catastrophe business.

The loss and loss expense ratio increased 71.3 percentage points and 24.5 percentage points in the three and nine months ended September 30, 2004, respectively. The following table shows the impact of catastrophe charges and prior period development on our loss and loss expense ratio for the three and nine months ended September 30, 2004 and 2003.

	Three Months Ended September 30				Nine Months Ended September 30
	2004		2003		2004		2003
Loss and loss expense ratio, as reported	120.2	%	48.9	%	74.1	%	49.6	%
Catastrophe charges impact	74.9	%	4.4	%	26.1	%	5.9	%
Adverse (favorable) development impact	(6.1	)%	(1.0	)%	(4.6	)%	(2.0	)%
Loss and loss expense ratio, adjusted	51.4	%	45.5	%	52.6	%	45.7	%

Catastrophe charges in the nine months ended September 30, 2004, were $278 million, all occurring in the current quarter. This compares with catastrophe charges of $12 million and $47 million in the three and nine months ended September 30, 2003, respectively. For the three months ended September 30, 2004, Global Reinsurance experienced favorable prior period development of $22 million representing 1.8 percent of the segment’s unpaid loss and loss expense reserves at the beginning of the period. The favorable development is primarily related to property and other short-tail lines and resulted from a difference between expected claims emergence pursuant to reserving assumptions used for accident years 2003 and 2002 and actual claims experience reported by ceding companies. For the three months ended September 30, 2003, Global Reinsurance experienced favorable development of $3 million. The 2003 development is principally related to favorable settlement of case reserves on property catastrophe business at ACE Tempest Re Bermuda, certain short-tail property lines at ACE Tempest Re USA, and the aviation line at ACE Tempest Re Europe.

The remaining increase in the loss and loss expense ratio was primarily related to the shift in mix of business that has resulted from growth in non-catastrophe P&C business at ACE Tempest Re USA and ACE Tempest Re Europe. Non-catastrophe P&C business typically exhibits higher loss ratios than property catastrophe business (except in periods with high catastrophe charges). As Global Reinsurance increases non-catastrophe P&C writing, we expect its loss and loss expense ratio to continue to increase in line with what would be expected from a traditional multi-line reinsurer.

Global Reinsurance’s policy acquisition cost ratio declined in the current quarter, primarily due to reductions at ACE Tempest Re UK and ACE Tempest Re Bermuda. ACE Tempest Re UK’s policy acquisition ratio declined due to a variation in the mix of policies compared to the prior year, while ACE Tempest Re Bermuda had non-renewals of two treaties with relatively high-acquisition cost treaties. For the nine months ended September 30, 2004, Global Reinsurance’s policy acquisition ratio increased due to the higher proportion of business generated from ACE Tempest Re USA, relative to ACE Tempest Re Europe and ACE Tempest Re Bermuda. ACE Tempest Re USA’s business is written more on a pro-rata basis (versus excess-of-loss), which incurs higher acquisition costs due to the higher level of ceding commissions paid. Administrative expenses increased in the three and nine months ended September 30, 2004, primarily due to higher staffing costs to support growth in business at ACE Tempest Re USA. The administrative expense ratio decreased due to increased net premiums earned.

In the current quarter Global Reinsurance reported an underwriting loss of $155 million. Underwriting income declined 93 percent in the nine months ended September 30, 2004. The deterioration in the current periods is a result of the catastrophe charges discussed above, partially offset by higher net premiums earned, and the increased favorable prior period

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development. Foreign exchange did not have a material impact on Global Reinsurance’s underwriting (loss) income in the three and nine months ended September 30, 2004

Life Reinsurance

ACE Life Re principally provides reinsurance coverage to other life insurance companies, focusing on guarantees included in certain fixed and variable annuity products. We do not compete on a traditional basis for pure mortality business. The reinsurance transactions we undertake typically help clients – ceding companies – to manage mortality, morbidity, investment, and/or lapse risks embedded in their book of business. We price life reinsurance using actuarial and investment models that incorporate a number of factors, including assumptions for mortality, morbidity, expenses, demographics, persistency, investment returns and inflation. We assess the performance of our life reinsurance business based on life underwriting income which includes net investment income.

	Three Months Ended September 30					Nine Months Ended September 30
	2004			2003		2004			2003
	(in millions of U.S. dollars)
Net premiums written	$	59		$	47	$	165		$	138
Net premiums earned		60			46		165			136
Life and annuity benefits		48			45		134			137
Policy acquisition costs		6			5		17			11
Administrative expenses		1			—		3			2
Net investment income		8			10		24			25
Life underwriting income		13			6		35			11
Net realized gains (losses)		(37	)		1		(47	)		(10	)
Net income (loss)	$	(24	)	$	7	$	(12	)	$	1

Life underwriting income improved in the three and nine months ended September 30, 2004, compared with the same periods in 2003, primarily due to the increase in net premiums earned, combined with stable life and annuity benefits. Net premiums earned increased in the current periods primarily due to higher variable annuity production. Life and annuity benefits were stable due to the increased proportion of premium volume from variable annuity products, which typically have lower expected benefit pay-outs than other business. Net income decreased in the three and nine months ended September 30, 2004, due to the large net realized loss in the current quarter. The net realized loss was primarily a result of the decline in interest rates during the current quarter, which required a fair value adjustment of the derivative component of certain variable annuity products.

Financial Services

The Financial Services segment consists of our financial solutions business and our proportionate share of Assured Guaranty’s earnings; which is 100 percent through April 28, 2004 and 34.7 percent thereafter. The financial solutions operations provide one-off insurance and reinsurance solutions to clients with unique or complex risks, which are not adequately addressed in the traditional insurance market. Each financial solutions contract is structured to meet the needs of each client. Assured Guaranty provides credit enhancement products to the municipal finance, structured finance and mortgage markets.

Certain products (principally credit protection oriented) issued by the Financial Services segment have been determined to meet the definition of a derivative under FAS 133. For more information see the “Critical Accounting Estimates” section in our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2003.

From April 29, 2004, our proportionate share of Assured Guaranty’s earnings is reflected in “Other (income) expense” in our consolidated income statement. The equity pick-up from Assured Guaranty for the three and nine months ended September 30, 2004, was $22 million and $30 million, respectively.

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	Three Months Ended September 30						Nine Months Ended September 30
	2004			2003			2004			2003
	(in millions of U.S. dollars)
Net premiums written	$	68		$	105		$	290		$	763
Net premiums earned		111			205			424			629
Losses and loss expenses		116			144			291			466
Policy acquisition costs		2			17			22			45
Administrative expenses		4			22			38			60
Underwriting income (loss)	$	(11	)	$	22		$	73		$	58
Net investment income		29			49			118			149
Other (income) expense		(22	)		1			(11	)		—
Interest expense		2			2			5			5
Income tax expense		—			17			31			54
Net realized gains (losses)		(3	)		29			(30	)		98
Net income	$	35		$	80		$	136		$	246
Loss and loss expense ratio		104.7	%		70.2	%		68.6	%		74.0	%
Policy acquisition cost ratio		2.3	%		8.7	%		5.3	%		7.2	%
Administrative expense ratio		2.7	%		10.6	%		8.8	%		9.6	%
Combined ratio		109.7	%		89.5	%		82.7	%		90.8	%

Financial Services reported decreases in net premiums written of 35 percent and 62 percent in the three and nine months ended September 30, 2004, respectively, compared with the same periods in 2003. The decline was primarily a result of the sale of Assured Guaranty, as the second and third quarters of 2004 did not include net premiums written from Assured Guaranty (April 2004 production was offset by the effect of an inter-company reinsurance transaction which resulted in the transfer of unearned premium reserves to the Global Reinsurance segment), while net premiums written from financial guaranty business over the same period in 2003 was $230 million. The current quarter’s rate of decline was less than the nine month period due to the financial solutions unit which increased net premiums written by $73 million in the current quarter. The decrease in this segment’s net premiums written in the nine months ended September 30, 2004, also reflects the first quarter non-renewal of certain financial solutions business and the reversal of unearned premium reserves and related premiums written in connection with the termination of equity CDO business. With respect to the financial solutions business, premium volume can vary significantly from period to period and therefore premiums written in any one period are not indicative of premiums to be written in future periods.

The Financial Services segment reported an increase in underwriting income of 26 percent in the nine months ended September 30, 2004, including an underwriting loss of $11 million in the current quarter. The underwriting loss in the current quarter was primarily a result of a higher loss and loss expense ratio, primarily due to the catastrophe charges which contributed $11 million to the current quarter’s underwriting loss. Additionally, Assured Guaranty contributed underwriting income of $16 million in the three months ended September 30, 2003, compared with nil in the current quarter. The nine months ended September 30, 2004, were also impacted by the sale of Assured Guaranty but to a lesser extent as the company was not sold until the second quarter and the impact of the sale was partially offset by improved financial solutions underwriting income in the second quarter of 2004.

For the three and nine months ended September 30, 2004, Financial Services experienced favorable prior period development of $14 million and $21 million, respectively, representing 0.6 percent and 0.7 percent of the segment’s unpaid loss and loss expense reserves at the beginning of each respective period. For the three months ended September 30, 2004, the favorable development of $14 million is principally attributed to a multi-year claims-made insurance policy for which it was determined that certain claims previously recognized in 2003 and 2002 would fall below policy attachment points. The additional favorable development for the nine months ended September 30, 2004 is attributed to the receipt of ceding company reports updating claims information on a large high excess of loss assumed multi-year contract partially offset by adverse development on two smaller contracts.

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Net Investment Income

	Three Months Ended September 30					Nine Months Ended September 30
	2004		2003			2004		2003
	(in millions of U.S. dollars)
Insurance – North American	$	120	$	98		$	331	$	300
Insurance – Overseas General		61		39			164		111
Global Reinsurance – P&C		31		23			87		63
Global Reinsurance – Life		8		10			24		25
Financial Services		29		49			118		149
Corporate and Other		3		(3	)		2		(15	)
Net investment income	$	252	$	216		$	726	$	633

Net investment income is influenced by a number of factors, including the amounts and timing of inward and outward cash flows, the level of interest rates, and changes in overall asset allocation. Net investment income increased 17 percent and 15 percent in the three and nine months ended September 30, 2004, compared with the same periods in 2003. The increased net investment income was primarily due to the positive operating cash flows during 2003 and the nine months ended September 30, 2004 that has resulted in a higher average invested asset base. The annualized average market yield on fixed maturities was 4.0 percent at September 30, 2004.

Net Realized Gains (Losses)

Our investment strategy takes a long-term view, and our investment portfolio is actively managed to maximize total return within certain specific guidelines, designed to minimize risk. Our investment portfolio is reported at fair value. The effect of market movements on our investment portfolio impact income (through net realized gains (losses)) when securities are sold, when “other than temporary” impairments are recorded on invested assets or through the reporting of derivatives at fair value, including financial futures and options, interest rate swaps, GMIB reinsurance, and credit-default swaps. Changes in unrealized appreciation and depreciation on available-for-sale securities, which result from the revaluation of securities held, are reported as a separate component of accumulated other comprehensive income in shareholders’ equity.

The following table presents our pre-tax net realized gains (losses) for the three and nine months ended September 30, 2004 and 2003.

	Three Months Ended September 30						Nine Months Ended September 30
	2004			2003			2004			2003
	(in millions of U.S. dollars)
Fixed maturities and short-term investments	$	19		$	16		$	67		$	77
Equity securities		7			1			75			(53	)
Other investments		(10	)		(2	)		(21	)		(13	)
Currency		1			3			(2	)		18
Financial futures, options and interest rate swaps		(6	)		13			23			19
Fair value adjustment on insurance derivatives		(44	)		26			(75	)		76
Subtotal derivatives		(50	)		39			(52	)		95
Total net realized gains (losses)	$	(33	)	$	57		$	67		$	124

Consistent with our investment objectives and the classification of our investment portfolio as available for sale, subject to guidelines as to asset classes, credit quality, and liquidity approved by our Finance Committee, our investment managers generally have the ability to sell fixed maturity, short-term, or equity investments when they determine that an alternative security with comparable risks is likely to provide a higher investment return, considering the realized gain or loss on sale and differential in future investment income. Often, sales of individual securities occur when investment managers conclude there are changes in the credit quality of a particular security or, for other reasons, market value is apt to deteriorate. Further, we may sell securities when we conclude it is prudent to reduce a concentration to a particular issuer or industry. Therefore, sales volume may increase in a volatile credit market in which credit spreads and thus the market value of fixed maturity investments are subject to significant changes in a short period of time. The interest rate environment will tend to have a limited effect on sales volume but extreme conditions could have an affect on the magnitude of realized gains or losses. For example, in a declining rate environment, the market value of securities increase resulting in a greater likelihood of net

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realized gains and we would tend to reduce the average duration of our fixed maturity investment portfolio whereas an increasing rate environment would tend to have the opposite effect. The effect of a high level of realized losses or gains for a particular period will tend to be offset by increases or decreases in investment income, respectively, in subsequent periods. From a liquidity perspective, our greatest risk is that we could be forced to sell a large volume of securities at a loss (i.e., in a high interest rate environment) to meet operating needs and are thus unable to reinvest proceeds to recoup such losses with future investment income (see section entitled “Liquidity and Capital Resources” for more information).

FAS 133 requires us to recognize all derivatives as either assets or liabilities on our consolidated balance sheet, and measure them at fair value. We record the gains and losses resulting from the fair value measurement of derivatives in net realized gains (losses). We participate in derivative instruments in two principal ways as follows: i) to offer protection to others as the seller or writer of the derivative, such as our credit derivatives business and reinsurance of guaranteed minimum income benefits (GMIBs) that are treated as derivatives for accounting purposes; or ii) to mitigate our own risk, principally arising from our investment holdings. We do not consider either type of transaction to be speculative. We recorded net realized losses of $50 million and $52 million, in the three and nine months ended September 30, 2004, respectively, on all derivative transactions, compared with net realized gains of $39 million and $95 million in the same periods in 2003.

With respect to our credit derivatives and GMIB reinsurance businesses (insurance derivatives), we record a portion of the change in fair value in unpaid loss and loss expenses and future policy benefits for life and annuity contracts, respectively, representing our best estimate of loss pay-outs related to fees or premiums earned, and a portion in net realized gains (losses), representing other changes in fair value. The fair value adjustment included in net realized gains (losses) in the three and nine months ended September 30, 2004, were net realized losses of $44 million and $75 million, respectively, compared with net realized gains of $26 million and $76 million in the same periods in 2003. In 2004, the change in fair value was related to many factors including a loss of approximately $25 million related to the reversal of unrealized gains upon the termination of several credit default swaps. These credit default swaps were covering the equity layer of synthetic CDOs written by our financial solutions business. The unrealized losses were generally offset by increases in net premiums earned. In addition, net realized losses of $41 million and $51 million were reported for GMIB reinsurance in the three and nine months ended September 30, 2004, respectively. This was principally a result of a decrease in interest rates in the third quarter that increased the related fair value liability. In addition to affecting the fair value of guaranties on in-force annuities, interest rate changes also affect the fair value of new annuities attaching to GMIB reinsurance treaties during the current period because they are priced using interest rates prevalent at the inception of the treaty. Based on in-force annuities covered by GMIB reinsurance treaties at September 30, 2004, we estimate that a 50 basis points decline in interest rates would result in an unrealized loss of approximately $40 million. Similarly, we estimate that a one percent decline in the Standard and Poor’s (S&P) Index would result in an unrealized loss of approximately $6 million. These estimated changes in fair value would be recorded as net realized losses in our net income. The gain or loss created by the estimated fair value adjustment will rise or fall each period based on estimated market pricing and may not be an indication of ultimate claims. Fair value is defined as the amount at which an asset or liability could be bought or sold in a current transaction between willing parties. We generally plan to hold derivative financial instruments to maturity. Where we hold derivative financial instruments to maturity, these fair value adjustments would generally be expected to reverse resulting in no gain or loss over the entire term of the contract. However, in the event that we terminate a derivative contract prior to maturity, as a result of a decision to exit a line of business or for risk management purposes, the difference between the final settlement of cash inflows and outflows and financial statement accruals for premiums and losses will be reflected as premiums earned and losses incurred, respectively. Additionally, at termination, any unrealized gain or loss, previously classified as a realized gain or loss, will be reversed and classified as a realized loss or gain, respectively.

A net realized loss of $6 million and a net realized gain of $23 million were recorded on financial futures and option contracts and interest rate swaps in the three and nine months ended September 30, 2004, respectively, compared with net realized gains of $13 million and $19 million in the same periods in 2003. We recorded a net realized loss of $4 million and a net realized gain of $9 million on interest rate swaps in the three and nine months ended September 30, 2004, respectively, compared with a net realized gain of $5 million and a net realized loss of $9 million in the same periods in 2003. The interest rate swaps are designed to reduce the negative impact of increases in interest rates on our fixed maturity portfolio. We recorded a net realized loss of $2 million and a net realized gain of $2 million in the three and nine months ended September 30, 2004, respectively, on our S&P equity index futures contracts as the S&P 500 equity index decreased 1.9 percent and increased 1.5 percent during these periods. We use foreign currency forward contracts to minimize the effect of fluctuating foreign currencies on certain non-U.S. dollar holdings in our portfolio that are not specifically matching foreign currency liabilities. These contracts are not designated as specific hedges and, in accordance with FAS 133, we record all realized and unrealized gains and losses on these contracts as net realized gains (losses) in the period in which the currency values change.

We regularly review our investment portfolio for possible impairment based on criteria including economic conditions, credit loss experience and issuer-specific developments. If there is a decline in a security’s net realizable value, we must determine whether that decline is temporary or “other than temporary”. If we believe a decline in the value of a particular investment is temporary, we record it as an unrealized loss in our shareholders’ equity. If we believe the decline is “other than temporary”, we write down the carrying value of the investment and record a net realized loss in our statement of operations. The decision to recognize a decline in the value of a security carried at fair value as “other than temporary” rather than temporary

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has no impact on our book value. Once a security is identified as having a potential “other than temporary” impairment, we determine whether or not cost will ultimately be recovered and whether we have the intent and ability to hold the security until an expected recovery period, absent a significant change in facts that is expected to have a material adverse financial effect on the issuer.

Our net realized gains (losses) in the nine months ended September 30, 2004, included write-downs of $15 million related to fixed maturity investments, $5 million related to equity securities and $10 million related to other investments, as a result of conditions which caused us to conclude the decline in fair value of the investment was “other than temporary”. The nine months ended September 30, 2003, included write-downs of $25 million related to fixed maturity investments, $61 million related to equity securities and $20 million related to other investments.

The process of determining whether a decline in value is temporary or “other than temporary” requires considerable judgment and differs depending on whether or not the security is traded on a public market as well as by type of security. For more information on our process for reviewing our investments for possible impairment, see the “Net Realized Gains (Losses)” section in our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2003.

See Note 5 to the Interim Consolidated Financial Statements for a table which summarizes for all securities in an unrealized loss position at September 30, 2004 (including securities on loan), the aggregate fair value and gross unrealized loss by length of time the amounts have continuously been in an unrealized loss position.

Other Income and Expense

	Three Months Ended September 30					Nine Months Ended September 30
	2004			2003		2004			2003
	(in millions of U.S. dollars)
Equity in net income of unconsolidated entities	$	(21	)	$	—	$	(31	)	$	(5	)
Minority interest in net income of consolidated entities		(1	)		3		11			7
Goodwill impairment		1			—		14			6
Compensation expense relating to IPO		—			—		8			—
Other (income) expense	$	(21	)	$	3	$	2		$	8

The three and nine months ended September 30, 2004, includes equity in net income of subsidiary of $22 million and $30 million, respectively, from Assured Guaranty, which was offset by $8 million in compensation expense in connection with the settlement of ACE stock awards held by the employees of Assured Guaranty. Additionally, we recognized goodwill impairments of $13 million primarily as a result of a review conducted during the first quarter of 2004 and $1 million as a result of a profitability review performed during the current quarter, when it was determined that current expectations for future profitability of our wholly owned administration company were not sufficient to support a portion of the current carrying amount of goodwill.

Investments and Cash

Our principal investment objective is to ensure that funds are available to meet our insurance and reinsurance obligations. Within this broad liquidity constraint, the purpose of our investment portfolio’s structure is to maximize total return subject to specifically approved guidelines of overall asset classes, credit quality, and liquidity and volatility of expected returns. Our investment portfolio is invested primarily in fixed income securities with an average credit quality of AA, as rated by the independent investment rating service S&P. The portfolio is externally managed by independent, professional, investment managers. The average duration of our fixed income securities was 3.4 years at September 30, 2004, and December 31, 2003. Our “Other investments” principally comprise direct investments, investments in investment funds and investments in limited partnerships.

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The following table identifies our invested assets by type held at fair value and cost/amortized cost at September 30, 2004 and December 31, 2003.

	September 30, 2004				December 31, 2003
	Fair Value		Cost/ Amortized Cost		Fair Value		Cost/ Amortized Cost
	(in millions of U.S. dollars)
Fixed maturities	$	20,791	$	20,325	$	18,645	$	18,006
Securities on loan		1,044		1,000		684		650
Short-term investments		3,360		3,360		2,928		2,928
Cash		626		626		562		562
		25,821		25,311		22,819		22,146
Equity securities		960		849		544		401
Other investments		1,228		1,159		645		602
Total investments and cash	$	28,009	$	27,319	$	24,008	$	23,149

We also gain exposure to equity markets through the use of derivative instruments. The combined equity exposure through both our equity portfolio and derivative instruments was valued at $1.1 billion at September 30, 2004, compared with $662 million at December 31, 2003. The increase of $4 billion in total investments and cash is due to positive cash flows from operations as a result of strong premium volume, increased securities lending collateral and unrealized gains on the portfolio. Additionally, “Other investments” includes our 34.7 percent ($509 million) equity interest in Assured Guaranty. The increase was partially offset by a decline in invested assets due to the sale of Assured Guaranty.

The following tables show the market value of our fixed maturities, short-term investments, securities on loan and cash at September 30, 2004 and December 31, 2003. The first table lists elements according to type, and the second according to S&P credit rating.

	September 30, 2004				December 31, 2003
	Market Value		Percentage of Total		Market Value		Percentage of Total
	(in millions of U.S. dollars)				(in millions of U.S. dollars)
Treasury	$	1,491	5.8	%	$	1,715	7.5	%
Agency		1,506	5.8	%		1,512	6.6	%
Corporate		7,418	28.7	%		6,304	27.6	%
Mortgage-backed securities		4,940	19.1	%		3,894	17.1	%
Asset-backed securities		958	3.7	%		737	3.2	%
Municipal		591	2.3	%		1,445	6.3	%
Non-U.S.		4,955	19.2	%		3,723	16.3	%
Cash and short-term investments		3,962	15.4	%		3,489	15.4	%
Total	$	25,821	100	%	$	22,819	100	%

	Market Value		Percentage of Total		Market Value		Percentage of Total
	(in millions of U.S. dollars)				(in millions of U.S. dollars)
AAA	$	13,250	51.3	%	$	12,315	54.0	%
AA		4,146	16.1	%		3,389	14.8	%
A		4,378	17.0	%		3,534	15.5	%
BBB		2,248	8.7	%		1,783	7.8	%
BB		752	2.9	%		709	3.1	%
B		994	3.8	%		1,029	4.5	%
Other		53	0.2	%		60	0.3	%
Total	$	25,821	100	%	$	22,819	100	%

In accordance with our investment process, we invest in below-investment grade securities through dedicated investment portfolios managed by external investments managers that have investment professionals specifically dedicated to this asset class. At September 30, 2004, our fixed income investment portfolio included below-investment grade securities and non-rated securities which, in total, comprised approximately seven percent of our fixed income portfolio. We define a security as being below-investment grade if it has an S&P credit rating of BB or less. Our below investment-grade and non-rated portfolio includes approximately 500 names, with the top 15 holdings making up approximately 12 percent of the $1.9 billion

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balance at September 30, 2004. The highest single exposure in this portfolio of securities is $22 million. Below-investment grade securities have different characteristics than investment grade corporate debt securities. Risk of loss from default by the borrower is greater with below-investment grade securities. Below-investment grade securities are generally unsecured and are often subordinated to other creditors of the issuer. Also, issuers of below-investment grade securities usually have higher levels of debt and are more sensitive to adverse economic conditions such as recession or increasing interest rates, than are investment grade issuers. We reduce the overall risk in the below-investment grade portfolio, as in all investments, through careful credit analysis, strict investment policy guidelines, and diversification by issuer and/or guarantor as well as by industry.

Unpaid Losses and Loss Expenses

We establish reserves for the estimated unpaid ultimate liability for losses and loss expenses under the terms of our policies and agreements. These reserves take into account estimates both for claims that have been reported and for IBNR, and include estimates of expenses associated with processing and settling claims. The table below presents a rollforward of our unpaid losses and loss expenses for the nine months ended September 30, 2004.

	Gross Losses			Reinsurance Recoverable			Net Losses
	(in millions of U.S. dollars)
Balance at December 31, 2003	$	27,155		$	13,192		$	13,963
Losses and loss expenses incurred		8,060			2,559			5,501
Losses and loss expenses paid		(5,523	)		(2,453	)		(3,070	)
Sale of Assured Guaranty		(456	)		(103	)		(353	)
Other (including foreign exchange revaluation) (1)		367			427			(60	)
Balance at September 30, 2004	$	29,603		$	13,622		$	15,981

⁽¹⁾ Other includes approximately $220 million of gross losses and $140 million of reinsurance recoverable related to ACE increasing its participation in the Lloyds syndicate to 100 percent

The process of establishing reserves for claims can be complex and imprecise as it requires the use of informed estimates and judgments. Our estimates and judgments may be revised as claims develop; as additional experience and other data become available; as new or improved methodologies are developed; and as current laws change. The following table shows our total reserves segregated between case reserves and IBNR reserves.

	September 30, 2004						December 31, 2003
	Gross		Ceded		Net		Gross		Ceded		Net
	(in millions of U.S. dollars)
Case reserves	$	13,385	$	5,669	$	7,716	$	13,252	$	5,916	$	7,336
IBNR		16,218		7,953		8,265		13,903		7,276		6,627
Total	$	29,603	$	13,622	$	15,981	$	27,155	$	13,192	$	13,963

We continually evaluate our reserve estimates taking into account new information and discussion and negotiation with our insureds. While we believe our reserve for unpaid losses and loss expenses at September 30, 2004 is adequate, new information or trends, such as judicial action broadening the scope of coverage or expanding liability, may lead to future developments in ultimate losses and loss expenses significantly greater or less than the reserve provided, which could have a material adverse effect on future operating results. Particularly significant variables for which a change in assumption could have a material effect on unpaid losses and loss expenses include, but are not limited to, the following:

Insurance - North American Segment

Given the long reporting and paid development pattern, the tail factors used to project actual current losses to ultimate losses for claims covered by our middle market workers’ compensation policies require considerable judgment that could be material to consolidated losses and loss expense reserves. Specifically, a one percent change in the tail factor could cause approximately a $43 million change, either positively or negatively, for the selected net loss and loss expense ultimate for that segment. We believe that our selected tail factors represent the most likely loss development based on historical loss payment patterns of this and other comparable long-tail lines of business as well as the current legal and economic environment. The actual tail factor could vary by several percentage points from the tail factor selected. Because tail factors are stated in terms of decimals (e.g., 1.125) and often, the actuary’s choice regarding reasonably supportable tail factors range within percentages of each other, the realistic change in tail factors can be expressed in percentage points.

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Insurance – Overseas General

Certain international long tail lines, such as casualty and professional lines, are particularly susceptible to changes in loss trend and claim inflation. Heightened perceptions of tort and settlement awards around the world are increasing the demand for these products as well as contributing to the uncertainty of the reserving estimates. Our reserving methods rely heavily on loss development patterns estimated from historical data and while we attempt to adjust such factors for known changes in the current tort environment, it is possible that such factors may not entirely reflect all recent trends in tort environments. For example, a three month delay of our selected loss development patterns could increase reserve estimates on long tail casualty and professional lines by approximately $69 million.

Global Reinsurance

Typically there is inherent uncertainty around the length of paid and reporting development patterns, especially for certain casualty lines such as excess workers compensation or general liability which may take up to 30 years to fully develop. This uncertainty is accentuated by the need to supplement client development patterns with industry development patterns as justified by the credibility of the data. The underlying source and selection of the final development pattern can thus have a significant impact on the selected net loss and loss expense ultimate. For example, a 10 percent slowing or quickening of the development pattern for certain long-tail lines could cause the ultimate loss derived by the Bornhuetter-Ferguson method to increase by as much as 5 percent, or $30 million.

Assumed Reinsurance

At September 30, 2004, unpaid losses and loss expenses for the Global Reinsurance segment aggregated to $1.6 billion, consisting of $330 million of case reserves and $1.3 billion of incurred but not reported loss reserves.

Prior to 2000, our reinsurance operations had been concentrated in the property catastrophe reinsurance market. For catastrophe business, we principally estimate unpaid losses and loss expenses on an event basis by considering various sources of information including specific loss estimates reported by our cedants, ceding company and overall industry loss estimates reported by our brokers, and our internal data regarding reinsured exposures related to the geographical location of the event. The latter internal analysis enables us to establish catastrophe reserves for known events with more certainty at an earlier date than would be the case if we solely relied on reports from third parties to determine carried reserves.

In 2000, we began writing casualty lines of reinsurance in the United States, and to a lesser extent, Europe, Asia, and Australia. Given the long-tail nature of this business, these new lines have both increased the amount of reserves in the Global Reinsurance segment as well as the uncertainty in the loss estimation process. For our casualty reinsurance business, we generally rely on ceding companies to report claims and then use that data as a key input to estimate unpaid losses and loss expenses. Due to the reliance on claims information reported by ceding companies, as well as other factors, the estimation of unpaid losses and loss expenses for assumed reinsurance includes certain risks and uncertainties that are unique relative to our direct insurance business. These include, but are not necessarily limited to, the following:

• The reported claims information could be inaccurate.

• Typically a lag exists between the reporting of a loss event to a ceding company and its reporting to us as a reinsurance claim. The use of a broker to transmit financial information from a ceding company to us increases the reporting lag. Because most of our reinsurance business is produced by brokers, ceding companies generally first submit claim and other financial information to brokers who then report the proportionate share of such information to each reinsurer of a particular treaty. The reporting lag generally results in a longer period of time between the date a claim is incurred and the date a claim is reported compared to direct insurance operations. Therefore, the risk of delayed recognition of loss reserve development is higher for assumed reinsurance than for direct insurance lines.

• The historical claims data for a particular reinsurance agreement can be limited relative to our insurance business in that there may be less historical information available. Additionally, for many coverages, such as excess of loss contracts, there may be relatively few expected claims in a particular year so the actual number of claims may be susceptible to significant variability. In such cases, the actuary often relies on industry data from several recognized sources.

We mitigate the above risks in several ways. In addition to routine analytical reviews of ceding company reports to ensure reported claims information appears reasonable, we perform regular underwriting and claims audits of certain ceding companies to ensure reported claims information is accurate, complete, and timely. As appropriate, audit findings are used to adjust claims in the reserving process. We also use our knowledge of the historical development of losses from individual ceding companies to adjust the level of adequacy we believe exists in the reported ceded losses.

Within the Insurance – North American segment, we also have exposure to certain liability reinsurance lines that have been in run-off since 1994. Unpaid losses and loss expenses relating to this run-off reinsurance business resides within the Brandywine Division of our Insurance – North American segment. Most of the remaining unpaid losses and loss expense reserves for the run-off reinsurance business relate to asbestos and environmental claims. (See section entitled “Asbestos and Environmental Claims for more information)

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Asbestos and Environmental Claims

Included in our liabilities for losses and loss expenses are amounts for A&E. These A&E liabilities principally relate to claims arising from remediation costs associated with hazardous waste sites and bodily-injury claims related to asbestos products and environmental hazards. The estimation of these liabilities is particularly sensitive to the recent legal environment, including specific settlements that may be used as precedents to settle future claims. These amounts include provision for both reported and IBNR claims.

The table below presents selected loss reserve data for A&E exposures at September 30, 2004 and December 31, 2003.

	September 30, 2004				December 31, 2003
	Gross		Net		Gross		Net
	(in millions of U.S. dollars)
Asbestos	$	2,730	$	172	$	3,026	$	300
Environmental and other latent exposures		1,007		155		1,148		250
Total	$	3,737	$	327	$	4,174	$	550

Paid losses in the nine months ended September 30, 2004 for asbestos claims were $300 million on gross reserves and $131 million on net reserves. Foreign exchange revaluation decreased the gross asbestos reserve by $2 million and increased the net reserve by $1 million in 2004. Environmental and other latent exposure claim payments were $141 million on gross reserves and $95 million on net reserves in the nine months ended September 30, 2004. The gross and net reserves for asbestos at December 31, 2003 were increased to reflect a reclassification of pre-1987 asbestos claims from general liability reserves for comparative purposes.

Our exposure to A&E claims principally arises out of liabilities acquired when we purchased Westchester Specialty in 1998 and the P&C business of CIGNA in 1999, with the larger exposure contained within the liabilities acquired in the CIGNA transaction. In 1996, prior to our acquisition of the P&C business of CIGNA, the Pennsylvania Insurance Commissioner approved a plan to restructure INA Financial Corporation and its subsidiaries which included a division of Insurance Company of North America (“INA”) into two separate corporations: (1) an active insurance company that retained the INA name and continued to write property-casualty business and (2) an inactive run-off company, now called Century Indemnity Company (“Century”), that succeeded to the A&E and other liabilities of INA under certain policies. As part of this restructuring, the A&E liabilities of various domestic and international INA subsidiaries were reinsured to Century and other subsidiaries of Brandywine Holdings Corporation (“Brandywine”), the current parent company of Century. As part of our 1999 acquisition of the P&C business of CIGNA, we acquired Brandywine and its various subsidiaries, including Century.

We are currently conducting a review of the numerous agreements and arrangements entered into in 1996 to accomplish the INA Financial restructuring, including the dividend retention fund and aggregate excess of loss reinsurance agreement discussed below, as well as certain agreements entered into in connection with the NICO/Bradywine cover discussed below, to determine the implications, which could be substantial, of our options with respect to our ongoing relationship with Century and the other Brandywine companies.

As part of the acquisition of Westchester Specialty, National Indemnity Company (“NICO”) provided $750 million of reinsurance protection for adverse development on loss and loss adjustment expense reserves. At September 30, 2004, the remaining unused limit in this NICO Westchester Specialty cover was $600 million.

As part of the acquisition of the CIGNA P&C business, NICO provided $2.5 billion of reinsurance protection to Century on all Brandywine loss and loss adjustment expense reserves, for any uncollectible reinsurance and on the A&E reserves of the domestic and international ACE INA insurance subsidiaries reinsured by Century. The benefits of this NICO contract flow to the other Brandywine companies and to the ACE INA insurance subsidiaries through reinsurance agreements between those companies and Century. This NICO/Brandywine cover was exhausted on an incurred basis with the increase in our A&E reserves in the fourth quarter of 2002.

The domestic ACE INA companies retain two primary funding obligations associated with the run-off Brandywine operations: a dividend retention fund obligation and required reinsurance coverage provided under an aggregate excess of loss reinsurance agreement. In accordance with the Brandywine restructuring order, INA Financial Corporation established and funded a dividend retention fund (the “Dividend Retention Fund”) consisting of $50 million plus investment earnings. Pursuant to terms of the restructuring, the full balance of this Dividend Retention Fund was contributed to Century as of December 31, 2002. To the extent in the future that dividends are paid by INA Holdings Corporation to its parent, INA Financial Corporation, and to the extent that INA Financial Corporation then pays such dividends to INA Corporation, a portion of those dividends must be withheld to replenish the principal of the Dividend Retention Fund to $50 million within five years. In 2003 and thus far in 2004, no such dividends were paid, and therefore no replenishment of the Dividend Retention Fund occurred. This dividend fund obligation, to maintain and to replenish the fund as necessary and to the extent dividends are paid, is ongoing until ACE INA receives prior written approval from the Pennsylvania Commissioner of Insurance to terminate the fund.

In addition, the ACE INA insurance subsidiaries are obligated to provide insurance coverage to Century in the amount of $800 million under an aggregate excess of loss reinsurance agreement (the “XOL Agreement”) if the statutory capital and surplus of Century falls below $25 million or if Century lacks liquid assets with which to pay claims as they become due, after giving effect to contribution of any Dividend Retention Fund balance. Coverage under the XOL Agreement was triggered as of December 31, 2002 following contribution of the Dividend Retention Fund balance. Approximately $463 million in GAAP basis losses were ceded under the XOL Agreement at September 30, 2004. Century reports the amount ceded under the XOL Agreement in accordance with statutory accounting principles which differ from GAAP by, among other things, allowing Century to discount its reserves.

The Pennsylvania Insurance Department requires a biennial, external actuarial review of liabilities residing in Century Indemnity Company as well as certain other U.S. subsidiaries of Brandywine. That review was last completed during the first quarter of 2003 and we recorded the financial impact in the year ended December 31, 2002. We expect the next review to be completed during the fourth quarter of 2004 and to record any financial impact in the year ending December 31, 2004.

In a lawsuit filed in the state of California in December 1999, certain of our competitors have challenged the restructuring that resulted in the creation of Brandywine. The restructuring was previously upheld by the Pennsylvania Supreme Court in July 1999. The lawsuit alleges that the restructuring does not effectively relieve the insurance subsidiary that issued the policies prior to the restructuring (Insurance Company of North America) from liabilities for claims on those policies by California policyholders. The California trial court has held in response to a pre-trial motion that a California statute does prohibit the transfer of California policies to a subsequent legal entity without the consent of the policyholders and noted that consent was not received in the context of the Brandywine restructuring. ACE intends to appeal this decision following completion of the remaining issues in the case in the trial court. The liabilities that are the subject of this California lawsuit are included within our A&E reserves for Brandywine.

The current case law regarding A&E claims can be characterized as still evolving and we do not believe that any firm direction will develop in the near future. Therefore, it is not possible to determine the future development of A&E claims with the same degree of reliability as with other types of claims. Such future development will be affected by the extent to which courts continue to expand the liabilities of defendants as well as to expand the intent of the policies and the scope of the coverage, as they have in the past.

The U.S. Congress has from time to time considered possible legislation with respect to U.S. asbestos bodily-injury claims. We cannot predict if and when any such legislation will be enacted, what the terms of any such legislation would be and what the costs and benefits to ACE would be.

More information relating to our A&E loss reserves is included in our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2003.

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Reinsurance

One of the ways we manage our loss exposure is through the use of reinsurance. While reinsurance agreements are designed to limit our losses from large exposures and permit recovery of a portion of direct unpaid losses, reinsurance does not relieve us of liability to our insureds. Accordingly, the losses and loss expense reserves on our balance sheet represent our total unpaid gross losses. The reinsurance recoverable represents anticipated recoveries of a portion of those gross unpaid losses as well as amounts recoverable from reinsurers with respect to claims paid. The table below presents our net reinsurance recoverable at September 30, 2004 and December 31, 2003.

	September 30 2004			December 31 2003
	(in millions of U.S. dollars)
Reinsurance recoverable on paid losses and loss expenses	$	1,059		$	1,277
Bad debt reserve on paid losses and loss expenses		(428	)		(403	)
Reinsurance recoverable on future policy benefits		16			15
Reinsurance recoverable on unpaid losses and loss expenses		14,222			13,749
Bad debt reserve on unpaid losses and loss expenses		(600	)		(557	)
Net reinsurance recoverable	$	14,268		$	14,081

We evaluate the financial condition of our reinsurers and potential reinsurers on a regular basis and also monitor concentrations of credit risk with reinsurers. Provisions have been established for amounts estimated to be uncollectible.

Following is a breakdown of our reinsurance recoverable on paid losses at September 30, 2004 and December 31, 2003:

	September 30, 2004						December 31, 2003
Category	Amount		Bad Debt Reserve		% of Total Reserve		Amount		Bad Debt Reserve		% of Total Reserve
	(in millions of U.S. dollars)
General collections	$	550	$	46	8.4	%	$	730	$	45	6.2	%
Other		509		382	75.0	%		547		358	65.4	%
Total	$	1,059	$	428	40.4	%	$	1,277	$	403	31.6	%

The general collections category represents amounts in the process of collection in the normal course of business. These are balances for which we have no indication of dispute or credit-related issues.

The other category includes amounts recoverable that are in dispute, or are from companies in supervision, rehabilitation or liquidation. Our estimation of this reserve considers the merits of the underlying matter, the credit quality of the reinsurer and whether we have received collateral or other credit protections, such as parental guarantees.

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The following tables provide a listing of our largest reinsurers (on a one quarter lag basis) with the first category representing the top ten reinsurers and the second category representing the remaining reinsurers with balances greater than $20 million. The third category includes amounts due from over 2,500 companies, each having balances of less than $20 million. Our bad debt reserve in the three categories is principally based on an analysis of the credit quality of the reinsurer and collateral balances. The next category, mandatory pools and government agencies, includes amounts backed by certain state and federal agencies. In certain states, insurance companies are required by law to participate in these pools. The fifth category, structured settlements, includes annuities purchased from life insurance companies to settle claims. Since we retain the ultimate liability in the event that the life company fails to pay the claimant, we reflect the amount as a liability and as a recoverable for GAAP purposes. These amounts are not subject to dispute and we establish our bad debt reserve based on the application of historical collection experience. The next category, captives, includes companies established and owned by our insurance clients to assume a significant portion of their direct insurance risk from us, i.e., they are structured to allow clients to self-insure a portion of their insurance risk. It is generally our policy to obtain collateral equal to expected losses; where appropriate, exceptions are granted, but only with review and sign-off at a senior officer level. Our final category, other, includes amounts recoverable that are in dispute or are from companies that are in judicial or administrative supervision, rehabilitation or liquidation. We establish our bad debt reserve for these categories based on a case by case analysis of individual situations, including credit and collateral analysis and consideration of our collection experience in similar situations. At June 30, 2004, we held collateral of $2.7 billion, of which $1.7 billion was matched and usable against existing recoverables.

Breakdown of Reinsurance Recoverable	June 30 2004		Bad Debt Reserve		% of Gross
	(in millions of U.S. dollars)
Categories
Top 10 reinsurers	$	7,964		104	1.3	%
Other reinsurers balances greater than $20 million		3,263		138	4.2	%
Other reinsurers balances less than $20 million		1,044		107	10.2	%
Mandatory pools and government agencies		706		3	0.4	%
Structured settlements		424		2	0.5	%
Captives		1,013		1	0.1	%
Other		959		644	67.2	%
Total	$	15,373	$	999	6.5	%

Top 10 Reinsurers (net of collateral)

Berkshire Hathaway Insurance Group	Lloyd’s of London
CIGNA	Munich Re
Equitas	St. Paul Travelers Companies
GE Global Insurance Group	Swiss Re Group
Hannover	XL Capital Group

Other Reinsurers Balances Greater Than $20 million (net of collateral)

AIOI Insurance	Electric Insurance Company	Overseas Partners Ltd.
Allianz Group	Endurance Specialty	Partner Re
American International Group	Everest Re Group	Platinum Underwriters
Arch Capital	Fairfax Financial	QBE Insurance
Aspen Insurance Holdings Ltd	FM Global Group	Renaissance Re Holdings Ltd.
AVIVA	Gerling Group	Royal & Sun Alliance Insurance Group Plc
AXA	Great American P&C Insurance Companies	SCOR Group
Chubb Insurance Group	Hartford Insurance Group	Sompo Japan
CNA Insurance Companies	Independence Blue Cross (Amerihealth)	Toa Reinsurance Company
Constellation Reinsurance Company	ING – Internationale Nederlanden Group	Trenwick Group
Converium Group	Liberty Mutual Insurance Companies	White Mountains Insurance Group
DaimlerChrysler Insurance Company	Millea Holdings	WR Berkley Corp.
Dominion Ins. Co. Ltd	Mitsui Sumitomo Insurance Company Ltd	Zurich Financial Services Group

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Liquidity is a measure of a company’s ability to generate cash flows sufficient to meet short-term and long-term cash requirements of its business operations. As a holding company, ACE possesses assets that consist primarily of the stock of its subsidiaries, and of other investments. In addition to net investment income, our cash flows currently depend primarily on dividends or other statutorily permissible payments. Historically, these dividends and other payments have come from our Bermuda-based operating subsidiaries, which we refer to as our Bermuda subsidiaries.

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As an insurance company, one of our principal responsibilities to our clients is to ensure that we have ready access to funds to settle large unforeseen claims. Given anticipated growth in premiums and a lengthening of the average duration of our claim liabilities due to a higher proportionate growth in long-tail relative to short-tail business, we expect that positive cash flow from operations (underwriting activities and investment income) will be sufficient to cover cash outflows under most loss scenarios through 2005. To further ensure the sufficiency of funds to settle unforeseen claims, we hold a certain amount of invested assets in cash and short-term investments and maintain available credit facilities. In addition, for certain insurance, reinsurance, or deposit contracts that tend to have relatively large and reasonably estimable cash outflows, such as loss portfolio contracts, we attempt to establish dedicated portfolios of assets that are duration-matched with the related liabilities. With respect to the duration of our overall investment portfolio, we manage asset durations to both maximize return given current market conditions and provide sufficient liquidity to cover future loss payments. In a low rate environment, the overall duration of our fixed maturity investments tends to be shorter and in a high rate environment, such durations tend to be longer. Given the current low rate environment, at September 30, 2004, the average duration of our fixed maturity investments is less than the average expected duration of our insurance liabilities.

Despite our safeguards, if paid losses accelerated beyond our ability to fund such paid losses from current operating cash flows, we might need to either liquidate a portion of our investment portfolio or arrange for financing. Potential events causing such a liquidity strain could be several significant catastrophic events occurring in a relatively short period of time or large scale uncollectible reinsurance recoverables on paid losses (as a result of coverage disputes, reinsurers’ credit problems or decreases in the value of collateral supporting reinsurance recoverables). Additional strain on liquidity could occur if the investments sold to fund such paid losses were sold at depressed prices. Because each subsidiary focuses on a more limited number of specific product lines than is collectively available from the ACE group of companies, the mix of business tends to be less diverse at the subsidiary level. As a result, the probability of a liquidity strain, as described above, may be greater for individual subsidiaries than when liquidity is assessed on a consolidated basis. If such a liquidity strain were to occur in a subsidiary, we may be required to contribute capital to the particular subsidiary and/or curtail dividends from the subsidiary to support holding company operations. With respect to the catastrophe charges during the quarter ended September 30, 2004, we anticipate all loss payments will be funded in the ordinary course of business due to positive operating cash flow combined with adequate balances of cash and short-term investments.

The payments of dividends or other statutorily permissible distributions from our operating companies are subject to the laws and regulations applicable to each jurisdiction, as well as the need to maintain capital levels adequate to support the insurance and reinsurance operations, including financial strength ratings issued by independent rating agencies, which are discussed below. During the nine months ended September 30, 2004, we were able to meet all of our obligations, including the payment of dividends declared on our Ordinary Shares and Preferred Shares, with our net cash flow and dividends received. Should the need arise, we generally have access to the debt markets and other available credit facilities that are discussed below.

We assess which subsidiaries to draw dividends from based on a number of factors. Considerations such as regulatory and legal restrictions as well as the subsidiary’s financial condition are paramount to the dividend decision. The legal restrictions on the payment of dividends from retained earnings by our Bermuda subsidiaries are currently satisfied by the share capital and additional paid-in capital of each of the Bermuda subsidiaries. During the three months ended September 30, 2004, ACE Bermuda and ACE Tempest Life Reinsurance Ltd declared and paid dividends of $55 million and $75 million, respectively. During the nine months ended September 30, 2004, ACE Bermuda and ACE Tempest Life Reinsurance Ltd declared and paid dividends of $227 million and $225 million, respectively. No dividends were declared in the three months ended September 30, 2003. During the nine months ended September 30, 2003, ACE Bermuda declared and paid dividends of $281 million, and ACE Cap Re International Ltd. declared and paid dividends of $25 million.

The payment of any dividends from ACE Global Markets or its subsidiaries would be subject to applicable U.K. insurance laws and regulations including those promulgated by the Society of Lloyd’s. ACE INA’s U.S. insurance subsidiaries may pay dividends, without prior regulatory approval, only from earned surplus and subject to certain annual limitations and the maintenance of a minimum capital requirement. ACE INA’s international subsidiaries are also subject to insurance laws and regulations particular to the countries in which the subsidiaries operate. These laws and regulations include restrictions that limit the amount of dividends payable without prior approval of regulatory insurance authorities.

We did not receive any dividends from ACE Global Markets or ACE INA in the current period. Under the Lloyd’s accounting model, syndicates in Lloyd’s operate each year as an annual venture. Each year of account is held open for three years. At the end of three years, the year of account purchases reinsurance from the next open year, which is known as reinsurance to close or RITC, and distributes the remaining funds to the investors in the syndicate. ACE Global Markets has historically retained these funds for operational purposes. ACE INA issued debt to provide partial financing for the ACE INA acquisition and for other operating needs. This debt is serviced by dividends paid by ACE INA’s insurance subsidiaries to ACE INA as well as other group resources.

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Our sale of 65.3 percent of the common shares of Assured Guaranty in the second quarter generated proceeds, net of offering costs, of approximately $835 million and a return of capital of $200 million from Assured Guaranty, which were used to support our P&C business and strengthen our balance sheet capital position.

Our consolidated sources of funds consist primarily of net premiums written, net investment income and proceeds from sales and maturities of investments. Funds are used primarily to pay claims, operating expenses, dividends and for the purchase of investments. After satisfying our cash requirements, excess cash flows from these underwriting and investing activities are invested.

Our insurance and reinsurance operations provide liquidity in that premiums are received in advance, sometimes substantially in advance, of the time claims are paid. Generally cash flows are affected by claim payments that, due to the nature of our operations, may comprise large loss payments on a limited number of claims and which can fluctuate significantly from year to year. The irregular timing of these loss payments can create significant variations in cash flows from operations between periods. Sources of liquidity include cash from operations, financing arrangements or routine sales of investments.

• Our consolidated net cash flows from operating activities were $4 billion in the nine months ended September 30, 2004, compared with $2.6 billion in the same period in 2003. The increase of $1.4 billion primarily relates to the increase in net premiums written of $1.2 billion and net investment income of $93 million, combined with a decrease in loss and loss expenses paid of $119 million.

• Our consolidated net cash flows used for investing activities increased to $3.9 billion in the nine months ended September 30, 2004, and was net of $953 million received from the sale of Assured Guaranty (net of cash sold). This compares with net cash flows used for investing activities of $3.3 billion in the same period in 2003. This increase primarily reflects our strong consolidated net cash flows from operating activities. Net purchases of fixed maturities were $4.3 billion in the nine months ended September 30, 2004, compared with $3.4 billion in the same period in 2003.

• Our consolidated net cash flows used for financing activities was $95 million in the nine months ended September 30, 2004, compared with net cash flows from financing activities of $434 million in the same period in 2003. The current period included net proceeds of $499 million from our debt issuance, which was partially offset by the repayment of debt and trust preferred securities of $475 million. The same period in 2003 included net proceeds of $557 million from our Preferred Share issuance. In addition, an increase in proceeds of $37 million from the exercise of options for Ordinary Shares during the current period was partially offset by an increase in dividends paid of $33 million on all outstanding shares.

Although our ongoing operations continue to generate positive cash flows, our cash flows are currently impacted by a large book of loss reserves from businesses in run-off. The run-off operations generated negative operating cash flows of $45 million in the nine months ended September 30, 2004, compared with $503 million in the same period in 2003, primarily due to claim payments.

Both internal and external forces influence our financial condition, results of operations and cash flows. Claim 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 lapse between the occurrence of an insured loss, the reporting of the loss to us and the settlement of the liability for that loss. We believe that our cash balances, cash flow from operations, routine sales of investments and the liquidity provided by our credit facilities, as discussed below are adequate to meet expected cash requirements.

ACE and its subsidiaries are assigned debt and financial strength (insurance) ratings from internationally recognized rating agencies, including S&P, A.M. Best, Moody’s Investors Service and Fitch IBCA. The ratings issued on our companies by these agencies are announced publicly and are available directly from the agencies. Our website, acelimited.com, also contains some information about our ratings, which you can find under the “Investor Information” tab.

Financial strength ratings represent the opinions of the rating agencies on the financial strength of a company and its capacity to meet the obligations of insurance policies. Independent ratings are one of the important factors that establish our competitive position in the insurance markets. The rating agencies consider many factors in determining the financial strength rating of an insurance company, including the relative level of statutory surplus necessary to support the business operations of the company. These ratings are based upon factors relevant to policyholders, agents and intermediaries and are not directed toward the protection of investors. Such ratings are not recommendations to buy, sell or hold securities.

Debt ratings apply to short- and long-term debt as well as preferred stock. These ratings are assessments of the likelihood that we will make timely payments of principal and interest and preferred stock dividends.

It is possible that, in the future, one or more of the rating agencies may reduce our existing ratings. If one or more of our ratings were downgraded, we could incur higher borrowing costs and our ability to access the capital markets could be

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impacted. In addition, our insurance and reinsurance operations could be adversely impacted by a downgrade in our financial strength ratings, including a possible reduction in demand for our products in certain markets.

Capital Resources

Capital resources consist of funds deployed or available to be deployed to support our business operations. The following table summarizes the components of our capital resources at September 30, 2004 and December 31, 2003.

	September 30 2004			December 31 2003
	(in millions of U.S. dollars)
Short-term debt	$	146		$	546
Long-term debt		1,849			1,349
Total debt		1,995			1,895
Trust preferred securities		412			475
Preferred Shares		557			557
Ordinary shareholders’ equity		8,922			8,278
Total shareholders’ equity		9,479			8,835
Total capitalization	$	11,886		$	11,205
Ratio of debt to total capitalization		16.8	%		16.9	%
Ratio of debt plus trust preferreds to total capitalization		20.3	%		21.2	%

We believe our financial strength provides us with the flexibility and capacity to obtain funds externally through debt or equity financing on both a short-term and long-term basis. Our ability to access the capital markets is dependent on, among other things, market conditions and our perceived financial strength. We have accessed both the debt and equity markets from time to time.

During the second quarter of 2004, we issued $500 million of ACE INA 5.875 percent senior notes due June 15, 2014. The proceeds of the notes were used, in the current quarter, to repay $75 million of Capital Re trust preferred securities and $400 million of ACE INA 8.2 percent notes due in 2004, and for general corporate purposes.

Our diluted book value per Ordinary Share increased to $31.29 at September 30, 2004, compared with $29.46 at December 31, 2003. In calculating our diluted book value per Ordinary Share, we include in the denominator in-the-money options. The expected proceeds from the in-the-money options are included in the numerator. Shareholders’ equity increased $644 million in the nine months ended September 30, 2004, primarily due to net income of $857 million and cash received on the exercise of options for Ordinary Shares of $73 million, partially offset by dividends declared of $206 million and a decrease in unrealized gain on our investment portfolio of $123 million.

On January 14, 2004 and April 14, 2004, we paid dividends of 19 cents per Ordinary Share to shareholders of record on December 31, 2003 and March 31, 2004, respectively. On July 14, 2004 and October 14, 2004, we paid dividends of 21 cents per ordinary share to shareholders of record on June 30, 2004 and September 30, 2004, respectively. We have paid dividends each quarter since we became a public company in 1993. However, the declaration, payment and value of future dividends on Ordinary Shares is at the discretion of our Board of Directors and will be dependent upon our profits, financial requirements and other factors, including legal restrictions on the payment of dividends and such other factors as our Board of Directors deems relevant. Dividends on the Preferred Shares are payable quarterly, when and if declared by our Board of Directors, in arrears on March 1, June 1, September 1 and December 1 of each year. On March 1, 2004, June 1, 2004, and September 1, 2004 we paid dividends of $4.875 per Preferred Share (which translates to 48.75 cents per Depositary Share) to shareholders of record on February 29, 2004, May 31, 2004, and August 31, 2004, respectively.

As part of our capital management program, in November 2001, our Board of Directors authorized the repurchase of any ACE issued debt or capital securities including Ordinary Shares, up to $250 million. At September 30, 2004, this authorization had not been utilized.

In 2002, we filed a shelf registration statement with the SEC, which became effective in 2003, relating to a number of different types of debt and equity securities. At September 30, 2004, the amount available under the shelf filing was $425 million. During the current quarter, we filed a shelf registration statement with the SEC relating to the issuance of up to $1.5 billion of certain types of debt and equity securities. As of November 8, 2004, this registration statement was not effective.

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Credit Facilities

As our Bermuda subsidiaries are not admitted insurers and reinsurers in the U.S., the terms of certain U.S. insurance and reinsurance contracts require them to provide LOCs to clients. In addition, ACE Global Markets is required to satisfy certain U.S. regulatory trust fund requirements which can be met by the issuance of LOCs.

The following table shows our credit facilities by credit line, usage, expiry date and purpose at September 30, 2004.

	Credit Line1		Usage		Expiry Date	Purpose
Liquidity Facilities
ACE Limited2	$	600	$	64	April 2007	General Corporate
Secured Operational LOC Facilities
ACE Limited		500		194	Sept. 2007	General Corporate
Unsecured Operational LOC Facilities
ACE Limited		850		619	Sept. 2007	General Corporate
ACE Limited3		100		90	Oct. 2004	General Corporate
ACE International		27		—	Various	General Corporate
Unsecured Capital Facilities
ACE Limited4		676		676	Nov. 2008	General Corporate
Total	$	2,753	$	1,643

^1. Certain facilities are guaranteed by operating subsidiaries and/or ACE Limited

^2. Commercial paper back-up facility, may also be used for LOCs

^3. Renewal being finalized at time of filing

^4. Supports ACE Global Markets underwriting capacity for Lloyd’s Syndicate 2488-2004 capacity of £550 million (approximately $1 billion)

During the current quarter we entered into an $850 million unsecured operational LOC facility and a $500 million secured operational LOC facility, both expiring in September 2007. These facilities replace four LOC facilities permitting up to $1.4 billion of LOCs. Upon the effectiveness of the new LOC facilities, all outstanding LOCs issued under the replaced facilities were deemed to have been issued under the unsecured LOC facility and the replaced facilities terminated.

Some of the facilities noted above require that we maintain certain covenants, all of which have been met at September 30, 2004. These covenants include:

(i) maintenance of a minimum consolidated net worth covenant of not less than $6.0 billion (subject to a reset provision on the last day of each fiscal year) plus 25 percent of cumulative net income since December 31, 2003, plus 50 percent of net proceeds of any issuance of equity interests subsequent to December 31, 2003; and

(ii) maintenance of a maximum debt to total capitalization ratio of not greater than 0.35 to 1. Under this covenant, debt does not include trust preferred securities or mezzanine equity, except where the ratio of the sum of trust preferred securities and mezzanine equity to total capitalization is greater than 15 percent. In this circumstance, the amount greater than 15 percent would be included in the debt to total capitalization ratio.

At September 30, 2004, (a) the minimum consolidated net worth requirement under the covenant described in (i) above was $6.2 billion and our actual consolidated net worth as calculated under that covenant was $8.9 billion; and (b) our ratio of debt to total capitalization was 0.17 to 1.

In addition to these covenants, the ACE Global Markets capital facility requires that collateral be posted if the financial strength rating of ACE Limited falls to S&P BBB+ or lower. Prior to November 2003 (the last renewal date of the ACE Global Markets unsecured LOC), this requirement related to ACE Bermuda.

Our failure to comply with the covenants under any credit facility would, subject to grace periods in the case of certain covenants, result in an event of default. This could require us to repay any outstanding borrowings or to cash collateralize letters of credit under such facility. An event of default under one or more credit facilities with outstanding credit extensions of $25 million or more would result in an event of default under all of the facilities described above.

American Jobs Creation Act of 2004

On October 22, 2004, the American Jobs Creation Act of 2004 was signed into law by President Bush. The Act repeals the extraterritorial income exclusion provisions of the Internal Revenue Code, provides a deduction with respect to certain US manufacturing activities, creates a one-time incentive to repatriate earnings from non-US subsidiaries and modifies various provisions of the Code dealing with domestic, international and employee compensation issues. Many provisions of the Act will require further guidance from the Internal Revenue Service to fully assess their implications. While ACE is currently

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evaluating the impact of the Act on its operations the changes are not expected to have a material effect on ACE’s operating results or financial condition.

Recent Accounting Pronouncements

See Note 2 to the Interim Consolidated Financial Statements for a discussion of recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market Sensitive Instruments and Risk Management

Market risk represents the potential for loss due to adverse changes in the fair value of financial instruments. We are exposed to potential loss to various market risks, including changes in interest rates and foreign currency exchange rates. Our investment portfolio consists of both fixed income and equity securities, denominated in both U.S. and foreign currencies, which are sensitive to changes in interest rates, equity prices and foreign currency exchange rates. Due to the classification of the majority of our debt and equity securities as available-for-sale, changes in interest rates, equity prices or foreign currency exchange rates will have an immediate affect on comprehensive income and shareholders’ equity but will not ordinarily have an immediate affect on net income. Nevertheless, changes in interest rates and equity prices affect consolidated net income when, and if, a security is sold or impaired. We also use investment derivative instruments such as futures, options, interest rate swaps, and foreign currency forward contracts to manage the duration of our investment portfolio and foreign currency exposures and also to obtain exposure to a particular financial market. These instruments are sensitive to changes in interest rates, foreign currency exchange rates and equity security prices. Changes in the fair value of these derivative instruments have an immediate affect on both net income and shareholders’ equity. The portfolio includes other market sensitive instruments, which are subject to changes in market values with changes in interest rates.

Duration Management and Market Exposure Management

We use financial futures, options, interest rate swaps and foreign currency forward contracts for the purpose of managing certain investment portfolio exposures. These instruments are recognized as assets or liabilities in our Consolidated Financial Statements and changes in market value are included in net realized gains or losses in the consolidated statements of operations.

Our exposure to interest rate risk is concentrated in our fixed income portfolio, and to a lesser extent, our debt obligations. An increase in interest rates of 100 basis points applied instantly across the yield curve would have resulted in a decrease in the market value of our fixed income portfolio of 3.4 percent at September 30, 2004, and December 31, 2003. This equates to a pre-tax decrease in market value of approximately $789 million on a fixed income portfolio valued at $23 billion at September 30, 2004. This compares with an approximately $696 million pre-tax decrease in market value on a fixed income portfolio valued at $20.6 billion at December 31, 2003. An immediate time horizon was used as this presents the worst case scenario.

Our portfolio of equity securities, which we carry on our balance sheet at fair value, has exposure to price risk. This risk is defined as the potential loss in fair value resulting from adverse changes in stock prices. In addition, we attain exposure to the equity markets through the use of derivative instruments which also have exposure to price risk. Our U.S. equity portfolio is highly correlated with the S&P 500 index and changes in that index would approximate the impact on our portfolio. Our international equity portfolio has exposure to a broad range of non-U.S. equity markets, primarily in those countries where we have insurance operations. This portfolio is correlated to movement in each of these countries’ broad equity market. The combined equity exposure through both our portfolios of equity securities and derivative instruments was valued at $1.1 billion at September 30, 2004, compared with $662 million at December 31, 2003. A hypothetical ten percent decline in the price of each stock in our portfolio of equity securities and the index correlated to the derivative instruments would have resulted in pretax declines in fair value of $108 million and $66 million at September 30, 2004 and December 31, 2003, respectively. Changes in fair value of these derivative instruments are recorded as net realized gains (losses) in the consolidated statements of operations. Changes in the fair value of our equity portfolio are recorded as unrealized appreciation (depreciation) and are included as other comprehensive income in shareholders’ equity.

Many of our non-U.S. companies maintain both assets and liabilities in local currencies. Therefore, exchange rate risk is generally limited to net assets denominated in those foreign currencies. Foreign exchange risk is reviewed as part of our risk management process. Locally required capital levels are invested in home currencies in order to satisfy regulatory requirements, and to support local insurance operations regardless of currency fluctuations.

Item 4. Controls and Procedures

As of the end of the period covered by this report, the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s

65

disclosure controls and procedures as defined in Rule 13a-15 under the Securities Exchange Act of 1934. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in allowing information required to be disclosed in reports filed under the Securities and Exchange Act of 1934 to be recorded, processed, summarized and reported within time periods specified in the rules and forms of the SEC.

66

ACE LIMITED

PART II OTHER INFORMATION

Item 1. Legal Proceedings

Our insurance subsidiaries are subject to claims litigation involving disputed interpretations of policy coverages and in some jurisdictions, direct actions by allegedly injured persons seeking damages from policyholders. These lawsuits involving claims on policies issued by our subsidiaries which are typical to the insurance industry in general and in the normal course of business, are considered in our loss and loss expense reserves which are discussed in the unpaid losses and loss expenses discussion. In addition to claims litigation, we and our subsidiaries are subject to lawsuits and regulatory actions in the normal course of business that do not arise from or directly relate to claims on insurance policies. This category of business litigation typically involves, inter alia, allegations of underwriting errors or misconduct, employment claims, regulatory activity or disputes arising from our business ventures. While the outcomes of the business litigation involving us cannot be predicted with certainty at this point, we are disputing and will continue to dispute allegations against us that are without merit and believe that the ultimate outcomes of matters in this category of business litigation will not have a material adverse effect on our financial condition, future operating results or liquidity, although an adverse resolution of a number of these items could have a material adverse effect on our results of operations in a particular quarter or fiscal year.

Several purported shareholder class action lawsuits have been filed against ACE and certain of its present and former executive officers relating to certain of the practices being investigated by the AG Investigations. In addition, the plaintiffs in a pending lawsuit originally brought by policyholders against brokers has been amended by adding ACE and other carriers as additional defendants. ACE intends to vigorously defend against these actions.

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

This table provides information with respect to purchases by the Company of its Ordinary Shares during the three months ended September 30, 2004:

Issuer’s Purchases of Equity Securities*

Period	Total Number of Shares Purchased**	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan*	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan*
July 1, 2004 through July 31, 2004	12,707	$	41.93	—	$	250 million
August 1, 2004 through August 31, 2004	670	$	42.73	—	$	250 million
September 1, 2004 through September 30, 2004	—		—	—	$	250 million
Total	13,377

* As part of ACE’s capital management program, in November 2001, the Company’s Board of Directors authorized the repurchase of any ACE issued debt or capital securities including Ordinary Shares, up to $250 million. At September 30, 2004, this authorization had not been utilized.

** For the three months ended September 30, 2004 this columns relates entirely to the surrender to the Company of shares of Common Stock to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees

Item 5. Other Information

1. On August 13, 2004, the Company declared a quarterly dividend of $0.21 per Ordinary Share payable on October 14, 2004, to shareholders of record on September 30, 2004.

2. On August 13, 2004, the Company declared a dividend of $4.875 per Preferred Share, payable on September 1, 2004, to shareholders of record on August 31, 2004.

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Item 6. Exhibits

Exhibits

10.1	Reimbursement agreement for $500,000,000 Letter of Credit Facility on a secured basis, dated as of September 22, 2004, among ACE Limited, certain subsidiaries, various lenders and Wachovia Bank, National Association as administrative agent.
10.2	Reimbursement agreement for $850,000,000 Letter of Credit Facility on a unsecured basis, dated as of September 22, 2004, among ACE Limited, certain subsidiaries, various lenders and Wachovia Bank, National Association as administrative agent.
31.1	Certification Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
31.2	Certification Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
32.2	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.

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ACE LIMITED

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
November 9, 2004	/S/    EVAN GREENBERG
	Evan Greenberg President and Chief Executive Officer
November 9, 2004	/S/    PHILIP V. BANCROFT
	Philip V. Bancroft Chief Financial Officer

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ACE LIMITED

EXHIBITS

Exhibit Number	Description
	Exhibits
10.1	Reimbursement agreement for $500,000,000 Letter of Credit Facility on a secured basis, dated as of September 22, 2004, among ACE Limited, certain subsidiaries, various lenders and Wachovia Bank, National Association as administrative agent.
10.2	Reimbursement agreement for $850,000,000 Letter of Credit Facility on a unsecured basis, dated as of September 22, 2004, among ACE Limited, certain subsidiaries, various lenders and Wachovia Bank, National Association as administrative agent.
31.1	Certification Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
31.2	Certification Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
32.2	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.

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EX-10.1

Exhibit 10.1

REIMBURSEMENT AGREEMENT

among

ACE LIMITED

ACE BERMUDA INSURANCE LTD.

ACE TEMPEST LIFE REINSURANCE LTD.

ACE TEMPEST REINSURANCE LTD.,

as Account Parties,

THE BANKS NAMED HEREIN,

WACHOVIA BANK, NATIONAL ASSOCIATION,

as an Issuing Bank and as Administrative Agent

and

BANK OF AMERICA, N.A.,

as Syndication Agent

$500,000,000 Secured Letter of Credit Facility

WACHOVIA CAPITAL MARKETS, LLC

BANC OF AMERICA SECURITIES LLC

as Joint Book Runners and Joint Lead Arrangers

Dated as of September 22, 2004

TABLE OF CONTENTS

		Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01	Certain Defined Terms	1
1.02	Computation of Time Periods; Other Definitional Provisions	16
1.03	Accounting Terms and Determinations	17
ARTICLE II
AMOUNTS AND TERMS OF THE LETTERS OF CREDIT
2.01	The Letters of Credit	17
2.02	Issuance and Renewals and Drawings, Participations and Reimbursement with Respect to Letters of Credit	18
2.03	Repayment of Advances	22
2.04	Termination or Reduction of the LC Commitment Amounts	23
2.05	Fees	24
2.06	Increased Costs, Etc.	24
2.07	Payments and Computations	26
2.08	Taxes	27
2.09	Sharing of Payments, Etc.	29
2.10	Use of Letters of Credit	29
2.11	Defaulting Banks	29
2.12	Replacement of Affected Bank	31
2.13	Certain Provisions Relating to the Issuing Banks and Letters of Credit	31
2.14	Downgrade Event with Respect to a Bank	33
2.15	Non-Dollar Letters of Credit	35
2.16	Collateral	37
ARTICLE III
CONDITIONS OF LENDING AND ISSUANCES OF LETTERS OF CREDIT
3.01	Conditions Precedent to Effective Date	37
3.02	Conditions Precedent to Each Issuance, Extension or Increase of a Letter of Credit	39
3.03	Determinations Under Section 3.01	39
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01	Representations and Warranties of the Account Parties	40

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ARTICLE V
COVENANTS OF THE ACCOUNT PARTIES
5.01	Affirmative Covenants	44
5.02	Negative Covenants	46
5.03	Reporting Requirements	50
5.04	Financial Covenants	53
ARTICLE VI
EVENTS OF DEFAULT
6.01	Events of Default	54
6.02	Actions in Respect of the Letters of Credit upon Default	57
ARTICLE VII
THE GUARANTY
7.01	The Guaranty	58
7.02	Guaranty Unconditional	58
7.03	Discharge Only upon Payment in Full; Reinstatement in Certain Circumstances	59
7.04	Waiver by the Account Parties	59
7.05	Subrogation	59
7.06	Stay of Acceleration	60
7.07	Continuing Guaranty; Assignments	60
ARTICLE VIII
THE AGENTS
8.01	Authorization and Action	60
8.02	Agents’ Reliance, Etc.	61
8.03	Agents and Affiliates	61
8.04	Bank Credit Decision	61
8.05	Indemnification	62
8.06	Successor Administrative Agent	62
8.07	Collateral Matters	63
ARTICLE IX
MISCELLANEOUS
9.01	Amendments, Etc.	63
9.02	Notices, Etc.	64
9.03	No Waiver; Remedies	65

ii

9.04	Costs and Expenses	65
9.05	Right of Set-off	66
9.06	Binding Effect	66
9.07	Assignments and Participations	66
9.08	Execution in Counterparts	69
9.09	No Liability of the Issuing Banks	69
9.10	Confidentiality	70
9.11	Jurisdiction, Etc.	70
9.12	Governing Law	71
9.13	Waiver of Jury Trial	71
9.14	Disclosure of Information	71
9.15	USA Patriot Act	71
9.16	Certain Effective Date Matters	72

Schedule I	LC Commitment Amounts
Schedule I – Part 2	Domestic Lending Offices
Schedule II	Existing Letters of Credit
Schedule III	Methodology for Calculation of Collateral Values
Schedule 4.01(b)	Subsidiaries
Schedule 5.02(a)	Liens
Exhibit A	Form of Assignment and Acceptance
Exhibit B	Form of Collateral Value Report
Exhibit C-1	Form of Opinion of Maples and Calder
Exhibit C-2	Form of Opinion of Mayer, Brown, Rowe & Maw LLP
Exhibit C-3	Form of Opinion of Conyers, Dill & Pearman
Exhibit D	Form of Pledge and Security Agreement
Exhibit E	Form of Letter of Instruction

iii

REIMBURSEMENT AGREEMENT

REIMBURSEMENT AGREEMENT dated as of September 22, 2004, among ACE Limited, a Cayman Islands company (the “Parent”), ACE Bermuda Insurance Ltd., a Bermuda company (“ACE Bermuda”), ACE Tempest Life Reinsurance Ltd., a Bermuda company (“Tempest Life”), and ACE Tempest Reinsurance Ltd., a Bermuda company (“Tempest”) (ACE Bermuda, Tempest Life and Tempest, together with the Parent, the “Account Parties” and individually an “Account Party”), the banks, financial institutions and other institutional lenders listed on the signature pages hereof as the Initial Banks (the “Initial Banks”), Wachovia Bank, National Association (“Wachovia”), as an Issuing Bank (as hereinafter defined), Bank of America, N.A. (“Bank of America”), as syndication agent, (the “Syndication Agent”), Barclays Bank PLC (“Barclays”), as co-documentation agent, CitiBank, N.A. (“CitiBank”), as co-documentation agent, JPMorgan Chase Bank, as co-documentation agent (“Chase” and, together with Barclays and CitiBank, the “Documentation Agents”), and Wachovia, as administrative agent (together with any successor administrative agent appointed pursuant to Article VIII, the “Administrative Agent” and, together with the Syndication Agent and Documentation Agents, the “Agents”) for the Banks.

PRELIMINARY STATEMENTS:

The Account Parties have requested that the Issuing Banks and the Banks make available to the Account Parties a secured credit facility in an amount up to $500,000,000 to provide for the issuance of letters of credit for the account of one or more of the Account Parties. The Issuing Banks and the Banks have indicated their willingness to agree to make such letters of credit available on the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

1.01 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“Account Parties” has the meaning specified in the recital of parties to this Agreement.

“ACE Bermuda” has the meaning specified in the recital of parties to this Agreement.

“ACE INA” means ACE INA Holdings Inc., a Delaware corporation.

“Adjusted Consolidated Debt” means, at any time, an amount equal to (i) the then outstanding Consolidated Debt of the Parent and its Subsidiaries plus (ii) to the extent exceeding

1

an amount equal to 15% of Total Capitalization, the then issued and outstanding amount of Preferred Securities (other than any Mandatorily Convertible Preferred Securities).

“Administrative Agent” has the meaning specified in the recital of parties to this Agreement.

“Administrative Agent’s Account” means the account of the Administrative Agent maintained by the Administrative Agent at Wachovia Bank, National Association, Charlotte Plaza Building, 201 South College Street, 8^th Floor NC0680, Charlotte, North Carolina 28288, Account No. 5000000027444, Re: ACE Ltd., Attn: Syndication Agency Services, or such other account as the Administrative Agent shall specify in writing to the Banks.

“Advance” means a Letter of Credit Advance.

“Affected Bank” means any Bank that (i) has made, or notified any Account Party that an event or circumstance has occurred which may give rise to, a demand for compensation under Section 2.06(a) or (b) or Section 2.08 (but only so long as the event or circumstance giving rise to such demand or notice is continuing) or (ii) is a Downgraded Bank.

“Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and “under common control with”) of a Person means the possession, direct or indirect, of the power to vote 5% or more of the Voting Interests of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Interests, by contract or otherwise.

“Agents” has the meaning specified in the recital of parties to this Agreement.

“Agreement Currency” has the meaning specified in Section 2.15(g).

“Applicable Account Party” with respect to any outstanding or proposed Letter of Credit means the Account Party for the account of which such Letter of Credit was or is proposed to be issued.

“Applicable Lending Office” means, with respect to each Bank, such Bank’s Domestic Lending Office.

“Approved Investment” means any Investment that was made by the Parent or any of its Subsidiaries pursuant to investment guidelines set forth by the board of directors of the Parent which are consistent with past practices.

“Assignment and Acceptance” means an assignment and acceptance entered into by a Bank and an Eligible Assignee, and accepted by the Administrative Agent, in accordance with Section 9.07 and in substantially the form of Exhibit A hereto.

“Available Amount” of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time or at any future time (assuming

2

compliance at such time or such future time with all conditions to drawing) (including without limitation amounts which have been the subject of drawings by the applicable beneficiary but which have not yet been paid by an Issuing Bank).

“Bank of America” has the meaning specified in the recital of parties to this Agreement.

“Bankruptcy Law” means Title 11, U.S. Code, or any similar foreign, federal or state law for the relief of debtors.

“Banks” means the Initial Banks and each Person that shall become a Bank hereunder pursuant to Section 9.07(a), (b) and (c) for so long as such Initial Bank or Person, as the case may be, shall be a party to this Agreement.

“Barclays” has the meaning specified in the recital of parties to this Agreement.

“Base Amount” has the meaning set forth in Section 5.04(b).

“Base Rate” means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the rate of interest announced publicly by Wachovia in Charlotte, North Carolina from time to time, as Wachovia’s prime rate (which may not be its best lending rate) or, if higher on the day in question, ½ of 1% above the Federal Funds Rate.

“Bilateral Agreements” means (i) the Insurance and Reinsurance Letters of Credit Agreement dated November 20, 2003 issued by Barclays relating to the Lloyd’s Dollar Trust Funds of Syndicate 2488; and (ii) the Insurance Letters of Credit – Master Agreement dated April 20, 1994 between Tempest (then known as Tempest Reinsurance Company Limited) and CitiBank.

“Business Day” means a day of the year on which banks are not required or authorized by law to close in Charlotte, North Carolina, New York, New York, London, England or Bermuda.

“Capitalized Leases” means all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases.

“Change of Control” means the occurrence of any of the following: (a) any Person or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of Voting Interests of the Parent (or other securities convertible into such Voting Interests) representing 30% or more of the combined voting power of all Voting Interests of the Parent or (b) a majority of the board of directors of the Parent shall not be Continuing Members.

“CitiBank” has the meaning specified in the recital of parties to this Agreement.

“Collateral” means all the assets, property and interests in property that shall from time to time be pledged or be purported to be pledged as direct or indirect security for the Obligations pursuant to any one or more of the Security Documents.

3

“Collateral Value” means, for any Business Day as of which it is being calculated, (a) for each category of Collateral set forth on Schedule III, an amount equal to the “Eligible Percentage” of the market value (or, as to cash, the dollar amount) thereof set forth opposite such category of Collateral on Schedule III, and (b) for the Collateral, in the aggregate, the sum of such amounts, in each case as of the close of business on the immediately preceding Business Day or, if such amount is not determinable as of the close of business on such immediately preceding Business Day, as of the close of business on the most recent Business Day on which such amount is determinable, which Business Day shall be not more than two (2) Business Days prior to the Business Day as of which the Collateral Value is being calculated; provided that the calculation of the Collateral Value shall be further subject to the terms and conditions set forth on Schedule III; and provided further that no Collateral (including, without limitation, cash) shall be included in the calculation of the Collateral Value unless the Administrative Agent has a first priority perfected Lien on and security interest in such Collateral pursuant to the Security Documents.

“Collateral Value Report” has the meaning specified in Section 2.16(b).

“Committed Facility” means, at any time, the aggregate amount of the Banks’ LC Commitment Amounts at such time.

“Confidential Information” means information that any Loan Party furnishes to any Agent or any Bank, but does not include any such information that is or becomes generally available to the public other than as a result of a breach by any Agent or any Bank of its obligations hereunder or that is or becomes available to such Agent or such Bank from a source other than the Loan Parties that is not, to the best of such Agent’s or such Bank’s knowledge, acting in violation of a confidentiality agreement with a Loan Party.

“Consolidated” refers to the consolidation of accounts in accordance with GAAP.

“Consolidated Net Income” means, for any period, the net income of the Parent and its Consolidated Subsidiaries, determined on a Consolidated basis for such period.

“Consolidated Net Worth” means at any date the Consolidated stockholders’ equity of the Parent and its Consolidated Subsidiaries determined as of such date, provided that such determination for purposes of Section 5.04 shall be made without giving effect to adjustments pursuant to Statement No. 115 of the Financial Accounting Standards Board of the United States of America.

“Contingent Obligation” means, with respect to any Person, any obligation or arrangement of such Person to guarantee or intended to guarantee any Debt, leases, dividends or other payment obligations (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, (a) the direct or indirect guarantee, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of a primary obligor, (b) the obligation to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement or (c) any obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any

4

property constituting direct or indirect security therefor, (ii) to advance or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that Contingent Obligations shall not include any obligations of any such Person arising under insurance contracts entered into in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder), as determined by such Person in good faith.

“Continuing Member” means a member of the Board of Directors of the Parent who either (i) was a member of the Parent’s Board of Directors on the date of execution and delivery of this Agreement by the Parent and has been such continuously thereafter or (ii) became a member of such Board of Directors after such date and whose election or nomination for election was approved by a vote of the majority of the Continuing Members then members of the Parent’s Board of Directors.

“Custodial Account” means each custodial, brokerage or similar account of any Account Party maintained by a custodian, broker or other securities intermediary as a “securities account” within the meaning of Section 8-501(a) of the Uniform Commercial Code for such Account Party as the “entitlement holder” within the meaning of Section 8-102(7) of the Uniform Commercial Code pursuant to a Custodial Agreement, on which (and on the contents of which) a Lien has been granted as security for the Obligations.

“Custodial Agreement” means each custodial or similar agreement between the Account Parties (or any of them) and a Custodian, pursuant to which one or more Custodial Accounts are maintained, in each case as amended.

“Custodian” means (i) State Street (in its capacity as custodian of the State Street Custodial Accounts) and (ii) each other bank or financial institution that maintains a Custodial Account (in its capacity as custodian thereof), in each case including any sub-custodian.

“Debenture” means debt securities issued by ACE INA or the Parent to a Special Purpose Trust in exchange for proceeds of Preferred Securities and common securities of such Special Purpose Trust.

“Debt” of any Person means, without duplication for purposes of calculating financial ratios, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of such Person’s business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all obligations of such Person created or

5

arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all obligations of such Person as lessee under Capitalized Leases (excluding imputed interest), (f) all obligations of such Person under acceptance, letter of credit or similar facilities, (g) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interests (except for obligations to pay for Equity Interests within customary settlement periods) in such Person or any other Person or any warrants, rights or options to acquire such capital stock (excluding payments under a contract for the forward sale of ordinary shares of such Person issued in a public offering), valued, in the case of Redeemable Preferred Interests, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (h) all Contingent Obligations of such Person in respect of Debt (of the types described above) of any other Person and (i) all indebtedness and other payment obligations referred to in clauses (a) through (h) above of another Person secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness or other payment obligations; provided, however, that the amount of Debt of such Person under clause (i) above shall, if such Person has not assumed or otherwise become liable for any such Debt, be limited to the lesser of the principal amount of such Debt or the fair market value of all property of such Person securing such Debt; provided further that “Debt” shall not include obligations in respect of insurance or reinsurance contracts entered into in the ordinary course of business or any obligations of such Person (1) to purchase securities (or other property) which arise out of or in connection with the sale of the same or substantially similar securities (or other property) or (2) to return collateral consisting of securities arising out of or in connection with the loan of the same or substantially similar securities; provided further that, solely for purposes of Section 5.04 and the definitions of “Adjusted Consolidated Debt” and “Total Capitalization”, “Debt” shall not include (x) any contingent obligations of any Person under or in connection with acceptance, letter of credit or similar facilities or (y) obligations of the Parent or ACE INA under any Debentures or under any subordinated guaranty of any Preferred Securities or obligations of a Special Purpose Trust under any Preferred Securities.

“Default” means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.

“Defaulted Amount” means, with respect to any Bank at any time, any amount required to be paid by such Bank to any Agent or any other Bank hereunder or under any other Loan Document at or prior to such time that has not been so paid as of such time, including, without limitation, any amount required to be paid by such Bank to (a) an Issuing Bank pursuant to Section 2.02(f) to purchase a portion of a Letter of Credit Advance made by such Issuing Bank and (b) any Agent or any Issuing Bank pursuant to Section 8.05 to reimburse such Agent or such Issuing Bank for such Bank’s ratable share of any amount required to be paid by the Banks to such Agent or such Issuing Bank as provided therein.

“Defaulting Bank” means, at any time, any Bank that, at such time, (a) owes a Defaulted Amount or (b) shall take any action or be the subject of any action or proceeding of a type described in Section 6.01(g).

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“Documentation Agents” has the meaning specified in the recital of parties to this Agreement.

“Dollar Equivalent” has the meaning specified in Section 2.15(h).

“Domestic Lending Office” means, with respect to any Bank, the office of such Bank specified as its “Domestic Lending Office” opposite its name on Part 2 of Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Bank, as the case may be, or such other office of such Bank as such Bank may from time to time specify to any Account Party and the Administrative Agent.

“Downgrade Account” has the meaning specified in Section 2.14(a).

“Downgrade Event” means, with respect to any Bank, a reduction of the credit rating for the senior unsecured unsupported long-term debt of such Bank (or, if no such rating exists, then a reduction of the long-term issuer credit rating of such Bank) by S&P or Moody’s.

“Downgrade Notice” has the meaning specified in Section 2.14(a).

“Downgraded Bank” means any Bank which has a credit rating of less than A- (in the case of S&P) or A3 (in the case of Moody’s) for its senior unsecured unsupported long-term debt or which does not have any credit rating on such debt from one of S&P or Moody’s; provided, that if at any time such Bank has no such senior unsecured unsupported long-term debt rating from either rating service but does have a long-term issuer credit rating from either or both services, then such Bank shall not be considered a Downgraded Bank so long as such long-term issuer credit rating remains at or above A- (in the case of S&P) or A3 (in the case of Moody’s).

“Effective Date” means the first date on which the conditions set forth in Article III shall have been satisfied.

“Eligible Assignee” means (i) a Bank, (ii) an Affiliate of a Bank, or (iii) a commercial bank, a savings bank or other financial institution that is approved by the Administrative Agent and, unless an Event of Default has occurred and is continuing at the time any assignment is effected pursuant to Section 9.07, the Parent (such approvals not to be unreasonably withheld or delayed); provided, however, that neither any Loan Party nor any Affiliate of a Loan Party shall qualify as an Eligible Assignee under this definition.

“Environmental Action” means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, any Environmental Permit or Hazardous Material or arising from alleged injury or threat to health, safety or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief.

“Environmental Law” means any federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, writ, judgment, injunction, decree or judicial or agency

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interpretation, policy or guidance relating to pollution or protection of the environment, health, safety or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials.

“Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

“Equity Interests” means, with respect to any Person, shares of capital stock of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or other acquisition from such Person of such shares (or such other interests), and other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

“ERISA Affiliate” means any Person that for purposes of Title IV of ERISA is a member of the controlled group of any Loan Party, or under common control with any Loan Party, within the meaning of Section 414 of the Internal Revenue Code or Section 4001 of ERISA.

“Events of Default” has the meaning specified in Section 6.01.

“Existing Letters of Credit” means, collectively, the letters of credit outstanding on the Effective Date issued by Wachovia pursuant to the Existing Reimbursement Agreement, which letters of credit are listed on Schedule II hereto.

“Existing Reimbursement Agreement” means the Reimbursement Agreement, dated as of September 25, 2003, among the Account Parties, the banks and other lenders named therein, Bank of America, The Bank of Nova Scotia, Bank One, NA and Deutsche Bank AG, New York Branch, as Co-Syndication Agents, and Wachovia, as Issuing Bank and as Administrative Agent, as amended, providing for a $500,000,000 secured letter of credit facility for the benefit of the Account Parties.

“Existing Unsecured Reimbursement Agreement” means the Reimbursement Agreement, dated as of September 25, 2003, among the Account Parties, the banks and other lenders named therein, Bank of America, The Bank of Nova Scotia, Bank One, NA and Deutsche Bank AG, New York Branch, as Co-Syndication Agents, and Wachovia, as Issuing Bank and as Administrative Agent, as amended, providing for a $500,000,000 unsecured letter of credit facility for the benefit of the Account Parties.

“Expiration Date” shall mean September 22, 2007.

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“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it.

“Fee Letter” means the fee letter dated August 18, 2004 among the Parent, Wachovia and Wachovia Capital Markets, LLC, as amended.

“Fiscal Year” means the fiscal year of the Parent and its Consolidated Subsidiaries ending on December 31 in any calendar year.

“Foreign Government Scheme or Arrangement” has the meaning specified in Section 4.01(m)(ii).

“Foreign Plan” has the meaning specified in Section 4.01(m)(ii).

“GAAP” has the meaning specified in Section 1.03.

“Guaranty” means the undertaking by each of the Account Parties under Article VII.

“Hazardous Materials” means (a) petroleum or petroleum products, by-products or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law.

“Hedge Agreements” means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other hedging agreements.

“Indemnified Party” has the meaning specified in Section 9.04(b).

“Initial Banks” has the meaning specified in the recital of parties to this Agreement.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

“Investment” in any Person means any loan or advance to such Person, any purchase or other acquisition of any Equity Interests or Debt or the assets comprising a division or business unit or a substantial part or all of the business of such Person, any capital contribution to such Person or any other direct or indirect investment in such Person, including, without limitation, any acquisition by way of a merger or consolidation and any arrangement pursuant to which the investor incurs Debt of the types referred to in clause (h) or (i) of the definition of “Debt” in respect of such Person; provided, however, that any purchase by any Loan Party or any

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Subsidiary of any catastrophe-linked instruments which are (x) issued for the purpose of transferring traditional reinsurance risk to the capital markets and (y) purchased by such Loan Party or Subsidiary in accordance with its customary reinsurance underwriting procedures, or the entry by any Loan Party or any Subsidiary into swap instruments relating to such instruments in accordance with such procedures, shall be deemed to be the entry by such Person into a reinsurance contract and shall not be deemed to be an Investment by such Person.

“Issuing Banks” means Wachovia, CitiBank, Barclays and any other Bank that has been appointed by the Parent, has accepted such appointment and has been approved in writing by the Administrative Agent (which approval shall not be unreasonably withheld).

“Joint Lead Arrangers” means Wachovia Capital Markets, LLC and Banc of America Sercurities, LLC, collectively.

“JPMorgan Credit Agreement” has the meaning specified in Section 5.02(a)(xvii).

“Judgment Currency” has the meaning specified in Section 2.15(g).

“LC Commitment Amount” means, with respect to any Bank at any time, the amount set forth opposite such Bank’s name on Schedule I hereto under the caption “LC Commitment Amount” or, if such Bank has entered into one or more Assignment and Acceptances, set forth for such Bank in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such Bank’s “LC Commitment Amount”, as such amount may be reduced at or prior to such time pursuant to Section 2.04.

“LC Participation Obligations” has the meaning specified in Section 2.14(a).

“L/C Related Documents” has the meaning specified in Section 2.03(a)(ii).

“Letter of Credit Advance” has the meaning specified in Section 2.02(g).

“Letter of Credit Agreement” has the meaning specified in Section 2.02(a).

“Letter of Credit Exposure” at any time means the sum at such time of (a) the aggregate outstanding amount of Letter of Credit Advances, (b) the aggregate Available Amounts of all outstanding Letters of Credit (including, without limitation, all outstanding Existing Letters of Credit) and (c) the aggregate Available Amounts of all Letters of Credit which have been requested by an Account Party to be issued hereunder but have not yet been so issued.

“Letter of Credit Outstandings” at any time means the sum at such time of (a) the aggregate outstanding amount of Letter of Credit Advances and (b) the aggregate Available Amounts of all outstanding Letters of Credit, in each case after giving effect to any issuance or renewal of a Letter of Credit occurring on the date of determination and any other changes in the aggregate amounts under clauses (a) and (b) above as of such date, including as a result of any reimbursements of outstanding unpaid drawings under any Letter of Credit or any reductions in the maximum amount available for drawings under any Letter of Credit taking effect on such date.

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“Letter of Credit Participating Interest” has the meaning specified in Section 2.02(e).

“Letter of Credit Participating Interest Commitment” has the meaning specified in Section 2.02(e).

“Letter of Credit Participating Interest Percentage” means, for any Bank, a fraction, expressed as a percentage, the numerator of which is such Bank’s LC Commitment Amount and the denominator of which is the aggregate LC Commitment Amounts of all the Banks.

“Letter of Instruction” means a letter in substantially the form of Exhibit E.

“Letters of Credit” has the meaning specified in Section 2.01.

“Lien” means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property.

“Loan Documents” means (i) this Agreement, (ii) the Fee Letter, (iii) each Letter of Credit Agreement, (iv) each Security Document and (v) each Letter of Instruction, in each case as amended from time to time.

“Loan Parties” means the Account Parties.

“Mandatorily Convertible Preferred Securities” means units comprised of (i) Preferred Securities or preferred shares of Parent and (ii) a contract for the sale of ordinary shares of the Parent.

“Margin Stock” has the meaning specified in Regulation U.

“Material Adverse Change” means any material adverse change in the business, financial condition, operations or properties of the Parent and its Subsidiaries, taken as a whole.

“Material Adverse Effect” means a material adverse effect on (a) the business, condition, operations or properties of the Parent and its Subsidiaries, taken as a whole, (b) the rights and remedies of the Administrative Agent, any Issuing Bank or any Bank under any Loan Document or (c) the ability of the Loan Parties, taken as a whole, to perform their obligations under the Loan Documents.

“Material Financial Obligation” means a principal amount of Debt and/or payment obligations in respect of any Hedge Agreement of the Parent and/or one or more of its Subsidiaries arising in one or more related or unrelated transactions exceeding in the aggregate $50,000,000.

“Material Subsidiary” means (i) any Subsidiary of the Parent that has more than $10,000,000 in assets or that had more than $10,000,000 of revenue during the most recent period of four fiscal quarters for which financial statements are available, and (ii) any Subsidiary

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that is the direct or indirect parent company of any Subsidiary that qualified as a “Material Subsidiary” under clause (i) above.

“Minimum Amount” has the meaning set forth in Section 5.04(b).

“Moody’s” means Moody’s Investors Service, Inc.

“Multiemployer Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions.

“Net Proceeds” means, with respect to any issuance of Equity Interests by any Person, the amount of cash received by such Person in connection with such transaction after deducting therefrom the aggregate, without duplication, of the following amounts to the extent properly attributable to such transaction: (a) reasonable brokerage commissions, attorneys’ fees, finder’s fees, financial advisory fees, accounting fees, underwriting fees, investment banking fees, and other similar commissions, and fees and expenses and disbursements of any of the foregoing, in each case to the extent paid or payable by such Person; (b) printing and related expenses of filing and recording or registration fees or charges or similar fees or charges paid by such Person; and (c) taxes paid or payable by such Person to any governmental authority or regulatory body as a result of such transaction.

“Non-Dollar Letters of Credit” has the meaning specified in Section 2.15(a).

“Obligations” means all obligations of every nature of the Account Parties from time to time owing, due or payable to any Agent or to any Bank under this Agreement or any of the other Loan Documents, whether for principal, reimbursement for payments made under Letters of Credit (including, without limitation, Existing Letters of Credit), interest (including, to the greatest extent permitted by law, post-petition interest), fees, expenses, indemnities or any other obligations, and whether now existing or hereafter incurred, created or arising and whether direct or indirect, absolute or contingent, or due or to become due (including obligations of performance).

“Other Taxes” has the meaning specified in Section 2.08(b).

“Overnight Rate” has the meaning specified in Section 2.15(h).

“Parent” has the meaning specified in the recital of parties to this Agreement.

“Patriot Act” has the meaning specified in Section 9.15.

“PBGC” means the Pension Benefit Guaranty Corporation (or any successor).

“Pension Plan” means a “pension plan”, as such term is defined in section 3(2) of ERISA, which is subject to title IV of ERISA (other than any “multiemployer plan” as such term is defined in section 4001(a)(3) of ERISA), and to which any Loan Party or any ERISA Affiliate may have any liability, including any liability by reason of having been a substantial employer

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within the meaning of section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.

“Permitted Collateral Liens” has the meaning specified in Section 5.02(a).

“Permitted Liens” means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced or which are being contested in good faith by appropriate proceedings: (a) Liens for taxes, assessments and governmental charges or levies not yet due and payable; (b) Liens imposed by law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s Liens and other similar Liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than 90 days; (c) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations; and (d) easements, rights of way and other encumbrances on title to real property that do not render title to the property encumbered thereby unmarketable or materially adversely affect the use of such property for its present purposes.

“Person” means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.

“Pledge and Security Agreement” means the Pledge and Security Agreement made by the Account Parties party thereto in favor of the Administrative Agent, in substantially the form of Exhibit D, as amended.

“Preferred Interests” means, with respect to any Person, Equity Interests issued by such Person that are entitled to a preference or priority over any other Equity Interests issued by such Person upon any distribution of such Person’s property and assets, whether by dividend or upon liquidation.

“Preferred Securities” means (i) preferred securities issued by a Special Purpose Trust which shall provide, among other things, that dividends shall be payable only out of proceeds of interest payments on the Debentures, or (ii) other instruments that may be treated in whole or in part as equity for rating agency purposes while being treated as debt for tax purposes.

“Pro Rata” means from and to the Banks in accordance with their respective Letter of Credit Participating Interest Percentages.

“Pro Rata Share” means, for any Bank, its share determined Pro Rata, in accordance with the definition of the term “Pro Rata.”

“Redeemable” means, with respect to any Equity Interest, any Debt or any other right or obligation, any such Equity Interest, Debt, right or obligation that (a) the issuer has undertaken to redeem at a fixed or determinable date or dates, whether by operation of a sinking fund or otherwise, or upon the occurrence of a condition not solely within the control of the issuer or (b) is redeemable at the option of the holder.

“Register” has the meaning specified in Section 9.07(d).

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“Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time.

“Required Banks” means, at any time, Banks owed or holding at least a majority in interest of the sum of (a) aggregate principal amount of the Letter of Credit Advances outstanding at such time and (b) the aggregate Available Amount of all Letters of Credit outstanding at such time, or, if no such principal amount and no Letters of Credit are outstanding at such time, Banks having LC Commitment Amounts constituting at least a majority in interest of the aggregate of the LC Commitment Amounts; provided, however, that if any Bank shall be a Defaulting Bank at such time, there shall be excluded from the determination of Required Banks at such time (A) the aggregate principal amount of the interest of such Bank in Letter of Credit Advances and outstanding at such time, (B) such Bank’s Pro Rata Share of the aggregate Available Amount of all Letters of Credit outstanding at such time and (C) the Unused LC Commitment Amount of such Bank at such time.

“Responsible Officer” means the Chairman, Chief Executive Officer, President, Chief Financial Officer, Chief Accounting Officer, Treasurer or General Counsel of the Parent.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.

“Securitization Transaction” means any sale, assignment or other transfer by Parent or any Subsidiary of any accounts receivable, premium finance loan receivables, lease receivables or other payment obligations owing to Parent or such Subsidiary or any interest in any of the foregoing, together in each case with any collections and other proceeds thereof, any collection or deposit accounts related thereto, and any collateral, guaranties or other property or claims in favor of Parent or such Subsidiary supporting or securing payment by the obligor thereon of, or otherwise related to, any such receivables.

“Security Documents” means, collectively, (i) the Pledge and Security Agreement and all other security agreements, pledge agreements, charges and mortgages at any time delivered to the Administrative Agent to create or evidence the Liens securing the Obligations, and (ii) the State Street Control Agreements and all other control agreements and similar agreements pursuant to which a Lien on a Custodial Account (and on the contents thereof) securing the Obligations is perfected in favor of the Administrative Agent, in each case under (i) and (ii), as amended.

“Significant Subsidiary” means a Subsidiary of Parent that is a “significant subsidiary” of the Parent under Regulation S-X promulgated by the Securities and Exchange Commission.

“Solvent” and “Solvency” mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (d) such Person is not

14

engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Special Purpose Trust” means a special purpose business trust established by the Parent or ACE INA of which the Parent or ACE INA will hold all the common securities, which will be the issuer of the Preferred Securities, and which will loan to the Parent or ACE INA (such loan being evidenced by the Debentures) the net proceeds of the issuance and sale of the Preferred Securities and common securities of such Special Purpose Trust.

“State Street” means State Street Bank and Trust Company.

“State Street Control Agreements” means, collectively, the control agreements among State Street, the Administrative Agent and (respectively) each of the Account Parties, each in form and substance reasonably satisfactory to the Administrative Agent, as amended.

“State Street Custodial Accounts” means, collectively, the Custodial Accounts of each of the Account Parties pledged pursuant to the Pledge and Security Agreement and in which the Administrative Agent’s Lien is perfected pursuant to the State Street Control Agreements.

“State Street Custodial Agreements” means, collectively, the Custodial Agreements by and between State Street and (respectively) each of the Account Parties, in each case as amended.

“Subsidiary” of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership, joint venture or limited liability company or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.

“Subsidiary Guarantors” means the Account Parties (other than the Parent).

“Syndication Agent” has the meaning specified in the recital of parties to this Agreement.

“Taxes” has the meaning specified in Section 2.08(a).

“Tempest” has the meaning specified in the recital of parties to this Agreement.

“Tempest Life” has the meaning specified in the recital of parties to this Agreement.

“Total Capitalization” means, at any time, an amount (without duplication) equal to (i) the then outstanding Consolidated Debt of the Parent and its Subsidiaries plus (ii) Consolidated

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stockholders equity of the Parent and its Subsidiaries plus (without duplication) (iii) the then issued and outstanding amount of Preferred Securities (including Mandatorily Convertible Preferred Securities) and (without duplication) Debentures.

“Uniform Commercial Code” has the meaning specified in the Pledge and Security Agreement.

“Unsecured Letter of Credit Facility” means the $850,000,000 unsecured letter of credit facility for the benefit of the Account Parties evidenced by the Reimbursement Agreement, dated as of even date herewith, among the Account Parties, the banks and other lenders named therein, Bank of America, as Syndication Agent, Barclays and CitiBank, as Issuing Banks, and Wachovia, as an Issuing Bank and as Administrative Agent (as amended or otherwise modified from time to time).

“Unused LC Commitment Amount” means, with respect to any Bank at any time, (a) such Bank’s LC Commitment Amount at such time minus (b) such Bank’s Pro Rata Share of (i) the aggregate Available Amount of all Letters of Credit hereunder (including, without limitation, all Existing Letters of Credit) and (ii) the aggregate principal amount of all Letter of Credit Advances made by the Issuing Banks pursuant to Section 2.02(g) and outstanding at such time (whether held by the Issuing Banks or the Banks).

“U.S. Government Securities” means securities issued or unconditionally guaranteed by the United States of America or any agency or instrumentality thereof and backed by the full faith and credit of the United States of America.

“Voting Interests” means shares of capital stock issued by a corporation, or equivalent Equity Interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency.

“Wachovia” has the meaning specified in the recital of parties to this Agreement.

“Welfare Plan” means a welfare plan, as defined in Section 3(1) of ERISA, that is maintained for employees of any Loan Party or in respect of which any Loan Party could have liability.

“Withdrawal Liability” has the meaning specified in Part I of Subtitle E of Title IV of ERISA.

1.02 Computation of Time Periods; Other Definitional Provisions. In this Agreement and the other Loan Documents in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding”. References in the Loan Documents to any agreement or contract “as amended” shall mean and be a reference to such agreement or contract as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with its terms.

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1.03 Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time in the United States of America (“GAAP”), applied on a basis consistent (except for changes concurred in by the Parent’s independent public accountants) with the most recent audited consolidated financial statements of the Parent and its Subsidiaries delivered to the Banks; provided that, if the Parent notifies the Administrative Agent that the Parent wishes to amend any covenant in Article V to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Administrative Agent notifies the Parent that the Required Banks wish to amend Article V for such purpose), then the Parent’s compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective (and, concurrently with the delivery of any financial statements required to be delivered hereunder, the Parent shall provide a statement of reconciliation conforming such financial information to such generally accepted accounting principles as previously in effect), until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Parent and the Required Banks.

ARTICLE II

AMOUNTS AND TERMS OF

THE LETTERS OF CREDIT

2.01 The Letters of Credit. Each Issuing Bank agrees, on the terms and subject to the conditions herein set forth, to issue standby letters of credit (the “Letters of Credit”) for the account of any Account Party on any Business Day from time to time during the period from the Effective Date to the Expiration Date. From and after the Effective Date, the Existing Letters of Credit shall be Letters of Credit hereunder. No Issuing Bank shall have any obligation to issue, and no Account Party will request the issuance of, any Letter of Credit hereunder if (a) the aggregate Available Amounts of all Letters of Credit issued by such Issuing Bank would exceed, after giving effect to such issuance, the maximum amount set forth in a letter agreement between such Issuing Bank and the Parent, on behalf of the Account Parties, or (b) the aggregate Available Amounts of all Letters of Credit would exceed, after giving effect to such issuance, the aggregate Collateral Value, or (c) any Bank’s Pro Rata Share of the Available Amount of such Letter of Credit exceeds, immediately before the time of such issuance, an amount equal to such Bank’s Pro Rata Share of the total Unused LC Commitment Amounts of the Banks at such time (as such amount shall be advised by the Administrative Agent to the respective Issuing Bank as contemplated by Section 2.02). Unless all the Banks consent otherwise in writing, no Issuing Bank shall have any obligation to issue, and no Account Party shall request the issuance of, any Letter of Credit hereunder if the Available Amount of such Letter of Credit exceeds, immediately before the time of such issuance, an amount equal to the total Unused LC Commitment Amounts of the Banks at such time (as such amount shall be advised by the Administrative Agent to the respective Issuing Bank as contemplated by Section 2.02). No Issuing Bank shall have any obligation to issue, and no Account Party shall request the issuance of, any Letter of Credit except within the following limitations: (i) subject to the provisions of Section 2.15, each Letter of Credit shall be denominated in U.S. dollars, (ii) each Letter of Credit

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shall be payable only against sight drafts (and not time drafts) and (iii) no Letter of Credit shall have an expiration date (including all rights of the Applicable Account Party or the beneficiary to require renewal) later than one year after the date of issuance thereof, but a Letter of Credit may by its terms be automatically renewable annually unless the respective Issuing Bank notifies the beneficiary thereof of its election not to renew such Letter of Credit (which such Issuing Bank agrees to do on and subject to the terms of Section 2.02(d)). No Issuing Bank shall have any obligation to issue any letter of credit which is unsatisfactory in form, substance or beneficiary to such Issuing Bank in the exercise of its reasonable judgment consistent with its customary practice. Letters of Credit may be issued for the account of any Subsidiary of the Parent that is not an Account Party hereunder, provided that the Parent shall be a joint applicant and account party with respect to any such Letter of Credit.

2.02 Issuance and Renewals and Drawings, Participations and Reimbursement with Respect to Letters of Credit.

(a) Request for Issuance. An Account Party may from time to time request, upon at least three Business Days’ notice (given not later than 11:00 A.M. Charlotte, North Carolina time on the last day permitted therefor), an Issuing Bank issue or renew (other than any automatic renewal thereof) a Letter of Credit by:

(i) delivering to such Issuing Bank, with a copy to the Administrative Agent, either (x) a written request to such effect or (y) a request made in electronic form through such Issuing Bank’s remote access system and in accordance with the terms and conditions (including any written agreements between such Issuing Bank and any Account Party) applicable thereto, in each case specifying the date on which such Letter of Credit is to be issued (which shall be a Business Day), the expiration date thereof, the Available Amount thereof, the name and address of the beneficiary thereof and the form thereof, and in each case with a copy of such request (or, in the case of clause (y) above, a written or electronic summary thereof) to the Administrative Agent; and

(ii) in the case of the issuance of a Letter of Credit, delivering to such Issuing Bank, with a copy to the Administrative Agent, a completed agreement and application with respect to such Letter of Credit as such Issuing Bank may specify for use in connection with such requested Letter of Credit (a “Letter of Credit Agreement”), together with such other certificates, documents and other papers or information as are specified in such Letter of Credit Agreement or as may be required pursuant to such Issuing Bank’s customary practices for the issuance of letters of credit (including requirements relating to requests made through such Issuing Bank’s remote access system).

In addition, the applicable Account Party shall deliver to the Administrative Agent a Collateral Value Report not later than 11:00 A.M. Charlotte, North Carolina time on the Business Day immediately preceding the date on which such Letter of Credit is to be issued.

If the limitations set forth in Sections 2.01(b) and 2.01(c) are satisfied and if the Required Banks have not given notice to the Administrative Agent to cease issuing or renewing Letters of Credit

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as contemplated by this Agreement, the Administrative Agent shall promptly notify the respective Issuing Bank (in writing or by telephone immediately confirmed in writing) that such Issuing Bank is authorized to issue or renew, as the case may be, such Letter of Credit. An Issuing Bank shall not issue or renew, as the case may be, any Letter of Credit (other than by the automatic renewal thereof) unless it shall have received notice from the Administrative Agent that it is authorized to do so as described in the preceding sentence. If such Issuing Bank issues or renews a Letter of Credit, it shall deliver the original of such Letter of Credit to the beneficiary thereof or as the Applicable Account Party shall otherwise direct, and shall promptly notify the Administrative Agent thereof and furnish a copy thereof to the Administrative Agent. Each Issuing Bank may issue Letters of Credit through any of its branches or Affiliates (whether domestic or foreign) that issue letters of credit, and each Account Party authorizes and directs each Issuing Bank to select the branch or Affiliate that will issue or process any Letter of Credit.

(b) Request for Extension or Increase. An Account Party may from time to time request an Issuing Bank extend the expiration date of an outstanding Letter of Credit issued for its account or increase (or, with the consent of the beneficiary, decrease) the Available Amount of or the amount available to be drawn on such Letter of Credit by delivering to such Issuing Bank, with a copy to the Administrative Agent, either (i) a written request to such effect or (ii) a request made in electronic form through such Issuing Bank’s remote access system. Such extension or increase shall for all purposes hereunder (including for purposes of Section 2.02(a)) be treated as though such Account Party had requested issuance of a replacement Letter of Credit (except only that such Issuing Bank may, if it elects, issue a notice of extension or increase in lieu of issuing a new Letter of Credit in substitution for the outstanding Letter of Credit).

(c) Automatic Renewals. If any Letter of Credit shall provide for the automatic renewal of the expiry date thereof unless the respective Issuing Bank gives notice that such expiry date shall not be renewed, then the respective Issuing Bank shall allow such Letter of Credit to be renewed unless it shall have received, at least five days prior to the date on which such notice of nonrenewal must be delivered under such Letter of Credit (or such shorter period acceptable to the respective Issuing Bank) (i) notice from the Administrative Agent that such Issuing Bank is not authorized to renew such Letter of Credit (or Letters of Credit generally), or (ii) notice from any Account Party that it does not want the Issuing Bank to renew such Letter of Credit. An Issuing Bank shall not allow any Letter of Credit to be automatically renewed if it has received notice from the Administrative Agent, as described in the preceding sentence, that it is not authorized to do so anytime prior to the date five days prior to the date on which the notice of nonrenewal must be delivered under such Letter of Credit.

(d) Limitations on Issuance, Extension, Renewal and Amendment. As between each Issuing Bank, on the one hand, and the Agents and the Banks, on the other hand, each Issuing Bank shall be justified and fully protected (i) in issuing or renewing a proposed Letter of Credit (other than by the automatic renewal thereof) if such Issuing Bank has received notice from the Administrative Agent that such Issuing Bank is authorized to issue or renew such Letter of Credit, and (ii) in allowing a Letter of Credit to be automatically renewed if such Issuing Bank has not received notice from the Administrative Agent as provided in Section 2.02(c) hereof that it is not authorized to do so at any time prior to the date five days prior to the date on which the notice of nonrenewal must be delivered under such Letter of Credit, in either case, notwithstanding any subsequent notices to such Issuing Bank, any knowledge of a Default, any

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knowledge of failure of any condition specified in Article III hereof to be satisfied, any other knowledge of such Issuing Bank, or any other event, condition or circumstance whatsoever. Each Issuing Bank may amend, modify or supplement Letters of Credit or Letter of Credit Agreements, or waive compliance with any condition of issuance, renewal or payment, without the consent of, and without liability to, any Agent or any Bank, provided that any such amendment, modification or supplement that extends the expiration date or increases the Available Amount of or the amount available to be drawn on an outstanding Letter of Credit shall be subject to Section 2.01. With respect to each Letter of Credit that remains outstanding at any time after the Expiration Date and that provides by its terms for automatic renewal, the respective Issuing Bank shall notify the beneficiary thereof, in accordance with the terms specified for such notice in such Letter of Credit, of such Issuing Bank’s election not to renew such Letter of Credit.

(e) Letter of Credit Participating Interests. Concurrently with the issuance of each Letter of Credit (and upon the Effective Date, with respect to each Existing Letter of Credit, and without any further action by any party to this Agreement), the respective Issuing Bank automatically shall be deemed, irrevocably and unconditionally, to have sold, assigned, transferred and conveyed to each other Bank, and each other Bank automatically shall be deemed, irrevocably and unconditionally, severally to have purchased, acquired, accepted and assumed from such Issuing Bank, without recourse to, or representation or warranty by, such Issuing Bank, an undivided interest, in a proportion equal to such Bank’s Pro Rata Share, in all of such Issuing Bank’s rights and obligations in, to or under such Letter of Credit, the related Letter of Credit Agreement, all reimbursement obligations with respect to such Letter of Credit, and all Collateral, guarantees and other rights from time to time directly or indirectly securing the foregoing (such interest of each Bank being referred to herein as a “Letter of Credit Participating Interest”, it being understood that the Letter of Credit Participating Interest of such Issuing Bank is the interest not otherwise attributable to the Letter of Credit Participating Interests of the other Banks). Each Bank irrevocably and unconditionally agrees to the immediately preceding sentence, such agreement being herein referred to as such Bank’s “Letter of Credit Participating Interest Commitment”. Amounts, other than Letter of Credit Advances made by a Bank other than the Issuing Banks and other than Letter of Credit commissions under Section 2.05(c)(i), payable from time to time under or in connection with a Letter of Credit or Letter of Credit Agreement shall be for the sole account of the Issuing Banks. On the date that any assignee becomes a party to this Agreement in accordance with Section 9.07 hereof, Letter of Credit Participating Interests in all outstanding Letters of Credit held by the Bank from which such assignee acquired its interest hereunder shall be proportionately reallocated between such assignee and such assignor Bank (and, to the extent such assignor Bank is an Issuing Bank, the assignee Bank shall be deemed to have acquired a Letter of Credit Participating Interest from such Issuing Bank to such extent). Notwithstanding any other provision hereof, each Bank hereby agrees that its obligation to participate in each Letter of Credit, its obligation to make the payments specified in Section 2.02(f), and the right of each Issuing Bank to receive such payments in the manner specified therein, are each absolute, irrevocable and unconditional and shall not be affected by any event, condition or circumstance whatever. The failure of any Bank to make any such payment shall not relieve any other Bank of its funding obligation hereunder on the date due, but no Bank shall be responsible for the failure of any other Bank to meet its funding obligations hereunder.

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(f) Payment by Banks on Account of Unreimbursed Draws. If an Issuing Bank makes a payment under any Letter of Credit and is not reimbursed in full therefor in accordance with Section 2.03(a), such Issuing Bank may notify the Administrative Agent thereof (which notice may be by telephone), and the Administrative Agent shall forthwith notify each Bank (which notice may be by telephone promptly confirmed in writing) thereof. No later than the Administrative Agent’s close of business on the date such notice is given (if notice is given by 2:00 P.M. Charlotte, North Carolina time) or 10:00 A.M. Charlotte, North Carolina time the following day (if notice is given after 2:00 P.M. Charlotte, North Carolina time or in the case of any Bank whose Applicable Lending Office is located in Europe), each Bank will pay to the Administrative Agent, for the account of such Issuing Bank, in immediately available funds, an amount equal to such Bank’s Pro Rata Share of the unreimbursed portion of such payment by such Issuing Bank. Amounts received by the Administrative Agent for the account of such Issuing Bank shall be forthwith transferred, in immediately available funds, to such Issuing Bank. If and to the extent that any Bank fails to make such payment to the Administrative Agent for the account of such Issuing Bank on such date, such Bank shall pay such amount on demand, together with interest, for such Issuing Bank’s own account, for each day from and including the date such payment is due from such Bank to such Issuing Bank to but not including the date of repayment to such Issuing Bank (before and after judgment) at a rate per annum for each day (i) from and including the date such payment is due from such Bank to such Issuing Bank to and including the second Business Day thereafter equal to the Federal Funds Rate and (ii) thereafter equal to the Base Rate. For avoidance of doubt, it is understood and agreed by the Banks that Letters of Credit issued prior to the Expiration Date may, by their terms, remain outstanding after the Expiration Date and that the obligations of the Banks to make payments under this Section 2.02(f) shall continue from and after the Expiration Date until the expiration or termination of all Letters of Credit, subject to and in accordance with the terms hereof.

(g) Letter of Credit Advances. The term “Letter of Credit Advance” is used in this Agreement in accordance with the meanings set forth in this Section 2.02(g). The making of any payment by an Issuing Bank under a Letter of Credit is sometimes referred to herein as the making of a Letter of Credit Advance by such Issuing Bank in the amount of such payment. The making of any payment by a Bank for the account of an Issuing Bank under Section 2.02(f) on account of an unreimbursed drawing on a Letter of Credit is sometimes referred to herein as the making of a Letter of Credit Advance to the Applicable Account Party by such Bank. The making of such a Letter of Credit Advance by a Bank with respect to an unreimbursed drawing on a Letter of Credit shall reduce, by a like amount, the outstanding Letter of Credit Advance of the Issuing Bank with respect to such unreimbursed drawing.

(h) Letter of Credit Reports. Each Issuing Bank will furnish to the Administrative Agent prompt written notice of each issuance or renewal of a Letter of Credit (including the Available Amount and expiration date thereof), amendment to a Letter of Credit, cancellation of a Letter of Credit and payment on a Letter of Credit. The Administrative Agent will furnish (A) to each Bank prior to the fifteenth Business Day of each calendar quarter a written report summarizing issuance, renewal and expiration dates of Letters of Credit issued or renewed during the preceding calendar quarter and payments and reductions in Available Amount during such calendar quarter on all Letters of Credit and (B) to each Bank prior to the fifteenth Business Day of each calendar quarter a written report setting forth the average daily aggregate Available Amount during the preceding calendar quarter of all Letters of Credit.

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2.03 Repayment of Advances.

(a) Account Parties’ Reimbursement Obligation.

(i) Each Account Party hereby agrees to reimburse each Issuing Bank (by making payment to the Administrative Agent for the account of each Issuing Bank in accordance with Section 2.07) in the amount of each payment made by each Issuing Bank under any Letter of Credit issued for such Account Party’s account, such reimbursement to be made on the date such payment under such Letter of Credit is made by the Issuing Bank (but not earlier than one Business Day after notice of the drawing giving rise to such payment under such Letter of Credit is given to such Account Party). Such reimbursement obligation shall be payable without further notice, protest or demand, all of which are hereby waived, and an action therefor shall immediately accrue. To the extent such payment by such Account Party is not timely made as provided in the first sentence of this clause (i), (x) such Account Party hereby agrees to pay to the Administrative Agent, for the respective accounts of each Issuing Bank and the Banks which have funded their respective shares of such amount remaining unpaid by such Account Party, on demand, interest at a rate per annum equal to the Base Rate plus 2%, for each day from and including the date on which the Applicable Account Party is to reimburse such Issuing Bank to, but excluding, the date such obligation is paid in full, and (y) each Account Party shall be deemed to have delivered an irrevocable and continuing Letter of Instruction to the Administrative Agent (which each Account Party hereby irrevocably authorizes the Administrative Agent to date the date that such payment to the Administrative Agent is due and payable and to deliver to the Persons identified therein) instructing the Administrative Agent to obtain, receive and apply at or after such time such part of the Collateral or the proceeds thereof as is equivalent to such reimbursement obligation and any interest thereon that may accrue prior to such application.

(ii) The obligation of each Account Party to reimburse each Issuing Bank for any payment made by each Issuing Bank under any Letter of Credit, and the obligation of each Bank under Section 2.02(f) with respect thereto, shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement, the applicable Letter of Credit Agreement and any other applicable agreement or instrument under all circumstances, including, without limitation, the following circumstances:

(A) any lack of validity or enforceability of any Loan Document, any Letter of Credit Agreement, any Letter of Credit or any other agreement or instrument relating thereto (all of the foregoing being, collectively, the “L/C Related Documents”);

(B) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations of any Account Party or any other Person in respect of any L/C Related Document or any other

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amendment or waiver of or any consent to departure from all or any of the L/C Related Documents;

(C) the existence of any claim, set-off, defense or other right that any Account Party or any other Person may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for which any such beneficiary or any such transferee may be acting), any Issuing Bank or any other Person, whether in connection with the transactions contemplated by the L/C Related Documents or any unrelated transaction;

(D) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

(E) payment by any Issuing Bank under a Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit;

(F) any exchange, release or non-perfection of any Collateral, or any release or amendment or waiver of or consent to departure from the Guaranty or any other guarantee, for all or any of the obligations of any Account Party or any other Person in respect of the L/C Related Documents; or

(G) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Account Party or a guarantor.

(b) Rescission. If any amount received by an Issuing Bank on account of any Letter of Credit Advance shall be avoided, rescinded or otherwise returned or paid over by such Issuing Bank for any reason at any time, whether before or after the termination of this Agreement (or such Issuing Bank believes in good faith that such avoidance, rescission, return or payment is required, whether or not such matter has been adjudicated), each Bank will (except to the extent a corresponding amount received by such Bank on account of its Letter of Credit Advance relating to the same payment on a Letter of Credit has been avoided, rescinded or otherwise returned or paid over by such Bank), promptly upon notice from the Administrative Agent or such Issuing Bank, pay over to the Administrative Agent for the account of such Issuing Bank its Pro Rata Share of such amount, together with its Pro Rata Share of any interest or penalties payable with respect thereto.

2.04 Termination or Reduction of the LC Commitment Amounts. The Parent may, upon at least three Business Days’ notice to the Administrative Agent, terminate in whole or reduce in part the unused portion of the LC Commitment Amounts; provided, however, that each partial reduction (i) shall be in an aggregate amount of $10,000,000 or an integral multiple of

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$1,000,000 in excess thereof and (ii) shall be made ratably among the Banks in accordance with their LC Commitment Amounts.

2.05 Fees.

(a) Commitment Fee. The Account Parties jointly and severally agree to pay to the Administrative Agent for the account of the Banks a commitment fee, from the Effective Date in the case of each Initial Bank and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Bank in the case of each other Bank until the Expiration Date, payable in arrears quarterly on the last Business Day of each March, June, September and December commencing December 31, 2004 and on the Expiration Date, at a rate equal to 0.10% per annum on the average daily Unused LC Commitment Amount of each Bank during such quarter (or shorter period); provided, however, that no commitment fee shall accrue on the LC Commitment Amount of a Defaulting Bank so long as such Bank shall be a Defaulting Bank.

(b) Administrative Agent’s Fees. The Account Parties jointly and severally agree to pay to the Administrative Agent for its own account such fees as may from time to time be agreed between the Parent and the Administrative Agent.

(c) Letter of Credit Fees, Etc.

(i) The Account Parties jointly and severally agree to pay to the Administrative Agent for the account of each Bank a commission, payable in arrears quarterly on the last Business Day of each March, June, September and December commencing December 31, 2004, and on the Expiration Date, on such Bank’s Pro Rata Share of the average daily aggregate Available Amount during such quarter (or shorter period) of all Letters of Credit outstanding from time to time at a rate equal to 0.30% per annum.

(ii) The Account Parties jointly and severally agree to pay (x) to Wachovia, in its capacity as an Issuing Bank and for its own account, the facing fee referred to the Fee Letter, on the terms set forth therein, and (y) each Issuing Bank’s customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, relating to letters of credit as are from time to time in effect. With respect to each Existing Letters of Credit, Wachovia shall be entitled to receive the fees and other amounts provided for under this Section 2.05(c)(ii) (to the extent not previously paid to Wachovia pursuant to the Existing Reimbursement Agreement) as if the Existing Letters of Credit were issued hereunder on the Effective Date.

2.06 Increased Costs, Etc.

(a) If, due to either (i) the introduction of or any change in or in the interpretation of, in each case after the date hereof, any law or regulation or (ii) the compliance with any guideline or request issued after the date hereof from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Bank of agreeing to issue or of issuing or maintaining or participating in Letters of Credit or the making

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of Letter of Credit Advances (excluding, for purposes of this Section 2.06, any such increased costs resulting from (x) Taxes or Other Taxes (as to which Section 2.08 shall govern) and (y) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Bank is organized or has its Applicable Lending Office or any political subdivision thereof), then the Account Parties jointly and severally agree to pay, from time to time, within five days after demand by such Bank (with a copy of such demand to the Administrative Agent), which demand shall include a statement of the basis for such demand and a calculation in reasonable detail of the amount demanded, to the Administrative Agent for the account of such Bank additional amounts sufficient to compensate such Bank for such increased cost. A certificate as to the amount of such increased cost, submitted to the Account Parties by such Bank, shall be conclusive and binding for all purposes, absent manifest error.

(b) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation, in each case after the date hereof, or (ii) the compliance with any guideline or request issued after the date hereof from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the amount of capital required or expected to be maintained by any Bank or any corporation controlling such Bank as a result of or based upon the existence of such Bank’s commitment to lend hereunder and other commitments of such type, then, within five days after demand by such Bank or such corporation (with a copy of such demand to the Administrative Agent), which demand shall include a statement of the basis for such demand and a calculation in reasonable detail of the amount demanded, the Account Parties jointly and severally agree to pay to the Administrative Agent for the account of such Bank, from time to time as specified by such Bank, additional amounts sufficient to compensate such Bank in the light of such circumstances, to the extent that such Bank reasonably determines such increase in capital to be allocable to the existence of such Bank’s commitment to issue or participate in Letters of Credit hereunder or to the issuance or maintenance of or participation in any Letters of Credit. A certificate as to such amounts submitted to the Account Parties by such Bank shall be conclusive and binding for all purposes, absent manifest error.

(c) Each Bank shall promptly notify the Account Parties and the Administrative Agent of any event of which it has actual knowledge which will result in, and will use reasonable commercial efforts available to it (and not, in such Bank’s good faith judgment, otherwise disadvantageous to such Bank) to mitigate or avoid any obligation by the Account Parties to pay any amount pursuant to Section 2.06(a) or 2.06(b) above or pursuant to Section 2.08 (and, if any Bank has given notice of any such event and thereafter such event ceases to exist, such Bank shall promptly so notify the Account Parties and the Administrative Agent). Without limiting the foregoing, each Bank will designate a different Applicable Lending Office if such designation will avoid (or reduce the cost to the Account Parties of) any event described in the preceding sentence and such designation will not, in such Bank’s good faith judgment, be otherwise disadvantageous to such Bank.

(d) Notwithstanding the provisions of Section 2.06(a), 2.06(b) or 2.08 (and without limiting Section 2.06(c) above), if any Bank fails to notify the Account Parties of any event or circumstance that will entitle such Bank to compensation pursuant to Section 2.06(a), 2.06(b) or 2.08 within 120 days after such Bank obtains actual knowledge of such event or circumstance,

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then such Bank shall not be entitled to compensation from the Account Parties for any amount arising prior to the date which is 120 days before the date on which such Bank notifies the Account Parties of such event or circumstance. For avoidance of doubt, it is noted that the term “Bank” as used in this Section 2.06 and in other Sections of this Agreement includes the Issuing Banks in its capacity as such.

2.07 Payments and Computations.

(a) The Account Parties shall make each payment hereunder irrespective of any right of counterclaim or set-off (except as otherwise provided in Section 2.11), not later than 11:00 A.M. (Charlotte, North Carolina time) on the day when due, in U.S. dollars, to the Administrative Agent at the Administrative Agent’s Account in same day funds, with payments being received by the Administrative Agent after such time being deemed to have been received on the next succeeding Business Day. The Administrative Agent will promptly thereafter cause like funds to be distributed (i) if such payment by such Account Party is in respect of principal, interest, commitment fees or any other amount then payable hereunder to more than one Bank, to such Banks for the account of their respective Applicable Lending Offices ratably in accordance with the amounts of such respective amount then payable to such Banks and (ii) if such payment by such Account Party is in respect of any amount then payable hereunder to one Bank, to such Bank for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 9.07(d), from and after the effective date of such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder in respect of the interest assigned thereby to the Bank assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.

(b) Each Account Party hereby authorizes each Bank, if an Event of Default under Section 6.01(a) has occurred and is continuing, to charge from time to time against any or all of such Account Party’s accounts with such Bank any amount that resulted in such Event of Default.

(c) All computations of interest on Letter of Credit Advances (and any other amount payable by reference to the Base Rate) when the Base Rate is determined by reference to Wachovia’s prime rate shall be made by the Administrative Agent on the basis of a year of 365 days or, if applicable, 366 days; all other computations of interest, fees and Letter of Credit commissions shall be made by the Administrative Agent on the basis of a year of 360 days. All such computations shall be made for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest, fees or commissions are payable. Each determination by the Administrative Agent of an interest rate, fee or commission hereunder shall be conclusive and binding for all purposes, absent manifest error.

(d) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fee, as the case may be.

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2.08 Taxes.

(a) Any and all payments by any Loan Party hereunder shall be made, in accordance with Section 2.07, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank and each Agent, taxes that are imposed on its overall net income by the United States and taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction under the laws of which such Bank or such Agent, as the case may be, is organized or any political subdivision thereof and, in the case of each Bank, taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction of such Bank’s Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments hereunder being herein referred to as “Taxes”). If any Loan Party shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or to any Bank or any Agent, (i) the sum payable by such Loan Party shall be increased as may be necessary so that after such Loan Party and the Administrative Agent have made all required deductions (including deductions applicable to additional sums payable under this Section 2.08) such Bank or such Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Loan Party shall make all such deductions and (iii) such Loan Party shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.

(b) In addition, each Loan Party shall pay any present or future stamp, documentary, excise, property or similar taxes, charges or levies that arise from any payment made hereunder or from the execution, delivery or registration of, performance under, or otherwise with respect to, this Agreement or any other Loan Document (herein referred to as “Other Taxes”).

(c) Each Loan Party shall indemnify each Bank and each Agent for and hold them harmless against the full amount of Taxes and Other Taxes, and for the full amount of taxes of any kind imposed by any jurisdiction on amounts payable under this Section 2.08, imposed on or paid by such Bank or such Agent (as the case may be) and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification payment shall be made within 30 days from the date such Bank or such Agent (as the case may be) makes written demand therefor.

(d) Within 30 days after the date of any payment of Taxes, each Loan Party shall furnish to the Administrative Agent, at its address referred to in Section 9.02, the original or a certified copy of a receipt evidencing such payment. In the case of any payment hereunder by or on behalf of a Loan Party through an account or branch outside the United States or by or on behalf of a Loan Party by a payor that is not a United States person, if such Loan Party determines that no Taxes are payable in respect thereof, such Loan Party shall furnish, or shall cause such payor to furnish, to the Administrative Agent, at such address, an opinion of counsel acceptable to the Administrative Agent stating that such payment is exempt from Taxes. For purposes of this Section 2.08(d) or Section 2.08(e), the terms “United States” and “United States person” shall have the meanings specified in Section 7701(a)(9) and 7701(a)(10) of the Internal Revenue Code, respectively.

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(e) Each Bank organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Bank or each Issuing Bank, as the case may be, and on the date of the Assignment and Acceptance pursuant to which it becomes a Bank in the case of each other Bank, and from time to time thereafter as requested in writing by the Parent (but only so long thereafter as such Bank remains lawfully able to do so), provide each of the Administrative Agent and the Parent with two original Internal Revenue Service forms W-8BEN or W-8ECI or (in the case of a Bank that has certified in writing to the Administrative Agent that it is not a “bank” as defined in Section 881(c)(3)(A) of the Internal Revenue Code) form W-8 (and, if such Bank delivers a form W-8, a certificate representing that such Bank is not a “bank” for purposes of Section 881(c)(3)(A) of the Internal Revenue Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of the Parent and is not a controlled foreign corporation related to the Parent (within the meaning of Section 864(d)(4) of the Internal Revenue Code)), as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that such Bank is exempt from or entitled to a reduced rate of United States withholding tax on payments pursuant to this Agreement or, in the case of a Bank providing a form W-8, certifying that such Bank is a foreign corporation, partnership, estate or trust. If the forms provided by a Bank at the time such Bank first becomes a party to this Agreement indicate a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Bank provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such forms; provided, however, that if, at the effective date of the Assignment and Acceptance pursuant to which a Bank becomes a party to this Agreement, the Bank assignor was entitled to payments under Section 2.08(a) in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Bank assignee on such date. If any form or document referred to in this Section 2.08(e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form W-8BEN, W-8ECI or W-8 (and the related certificate described above), that the Bank reasonably considers to be confidential, the Bank shall give notice thereof to the Parent and shall not be obligated to include in such form or document such confidential information.

(f) For any period with respect to which a Bank which may lawfully do so has failed to provide the Parent with the appropriate form described in Section 2.08(e) above (other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided or if such form otherwise is not required under Section 2.08(e) above), such Bank shall not be entitled to indemnification under Sections 2.08(a) or 2.08(c) with respect to Taxes imposed by the United States by reason of such failure; provided, however, that should a Bank become subject to Taxes because of its failure to deliver a form required hereunder, the Parent shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes.

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(g) Each Bank represents and warrants to the Account Parties that, as of the date such Bank becomes a party to this Agreement, such Bank is entitled to receive payments hereunder from the Account Parties without deduction or withholding for or on account of any Taxes.

2.09 Sharing of Payments, Etc. If any Bank shall obtain at any time any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise, other than as a result of an assignment pursuant to Section 9.07) (a) on account of Obligations due and payable to such Bank hereunder at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations due and payable to such Bank at such time to (ii) the aggregate amount of the Obligations due and payable to all Banks hereunder at such time) of payments on account of the Obligations due and payable to all Banks hereunder at such time obtained by all the Banks at such time or (b) on account of Obligations owing (but not due and payable) to such Bank hereunder at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations owing to such Bank at such time to (ii) the aggregate amount of the Obligations owing (but not due and payable) to all Banks hereunder at such time) of payments on account of the Obligations owing (but not due and payable) to all Banks hereunder at such time obtained by all of the Banks at such time, such Bank shall forthwith purchase from the other Banks such interests or participating interests in the Obligations due and payable or owing to them, as the case may be, as shall be necessary to cause such purchasing Bank to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Bank, such purchase from each other Bank shall be rescinded and such other Bank shall repay to the purchasing Bank the purchase price to the extent of such Bank’s ratable share (according to the proportion of (i) the purchase price paid to such Bank to (ii) the aggregate purchase price paid to all Banks) of such recovery together with an amount equal to such Bank’s ratable share (according to the proportion of (i) the amount of such other Bank’s required repayment to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. Each Account Party agrees that any Bank so purchasing an interest or participating interest from another Bank pursuant to this Section 2.09 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such interest or participating interest, as the case may be, as fully as if such Bank were the direct creditor of such Account Party in the amount of such interest or participating interest, as the case may be.

2.10 Use of Letters of Credit. The Letters of Credit shall be used for the general corporate purposes of the Account Parties and their respective Subsidiaries.

2.11 Defaulting Banks.

(a) In the event that, at any one time, (i) any Bank shall be a Defaulting Bank, (ii) such Defaulting Bank shall owe a Defaulted Amount to any Agent or any of the other Banks and (iii) any Account Party shall make any payment hereunder or under any other Loan Document to the Administrative Agent for the account of such Defaulting Bank, then the Administrative Agent may, on its behalf or on behalf of such other Banks and to the fullest extent permitted by applicable law, apply at such time the amount so paid by such Account Party to or for the account of such Defaulting Bank to the payment of each such Defaulted Amount to the extent required to pay such Defaulted Amount. In the event that the Administrative Agent

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shall so apply any such amount to the payment of any such Defaulted Amount on any date, the amount so applied by the Administrative Agent shall constitute for all purposes of this Agreement and the other Loan Documents payment, to such extent, of such Defaulted Amount on such date. Any such amount so applied by the Administrative Agent shall be retained by the Administrative Agent or distributed by the Administrative Agent to such other Banks, ratably in accordance with the respective portions of such Defaulted Amounts payable at such time to the Administrative Agent and such other Banks and, if the amount of such payment made by such Account Party shall at such time be insufficient to pay all Defaulted Amounts owing at such time to the Administrative Agent, such other Agents and such other Banks, in the following order of priority:

(i) first, to the Agents for any Defaulted Amounts then owing to the Agents;

(ii) second, to the Issuing Banks for any amount then due and payable to them, in their capacity as such, by such Defaulting Bank, ratably in accordance with such amounts then due and payable to the Issuing Banks; and

(iii) third, to any other Banks for any Defaulted Amounts then owing to such other Banks, ratably in accordance with such respective Defaulted Amounts then owing to such other Banks.

Any portion of such amount paid by such Account Party for the account of such Defaulting Bank remaining, after giving effect to the amount applied by the Administrative Agent pursuant to this Section 2.11(a), shall be applied by the Administrative Agent as specified in Section 2.11(b).

(b) In the event that, at any one time, (i) any Bank shall be a Defaulting Bank, (ii) such Defaulting Bank shall not owe a Defaulted Amount and (iii) any Account Party, any Agent or other Bank shall be required to pay or distribute any amount hereunder or under any other Loan Document to or for the account of such Defaulting Bank, then such Account Party or such Agent or such other Bank shall pay such amount to the Administrative Agent to be held by the Administrative Agent, to the fullest extent permitted by applicable law, in escrow and the Administrative Agent shall, to the fullest extent permitted by applicable law, hold in escrow such amount otherwise held by it. Any funds held by the Administrative Agent in escrow under this Section 2.11(b) shall be deposited by the Administrative Agent in an account with Wachovia in the name and under the control of the Administrative Agent, but subject to the provisions of this Section 2.11(b). The terms applicable to such account, including the rate of interest payable with respect to the credit balance of such account from time to time, shall be Wachovia’s standard terms applicable to escrow accounts maintained with it. Any interest credited to such account from time to time shall be held by the Administrative Agent in escrow under, and applied by the Administrative Agent from time to time in accordance with the provisions of, this Section 2.11(b). The Administrative Agent shall, to the fullest extent permitted by applicable law, apply all funds so held in escrow from time to time to the extent necessary to make any Advances required to be made by such Defaulting Bank and to pay any amount payable by such Defaulting Bank hereunder and under the other Loan Documents to the Administrative Agent or any other Bank, as and when such Advances or amounts are required to be made or paid and, if

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the amount so held in escrow shall at any time be insufficient to make and pay all such Advances and amounts required to be made or paid at such time, in the following order of priority:

(i) first, to the Agents for any amounts then due and payable by such Defaulting Bank to the Agents hereunder;

(ii) second, to the Issuing Banks for any amount then due and payable to them, in their capacity as such, by such Defaulting Bank, ratably in accordance with such amounts then due and payable to such Issuing Banks; and

(iii) third, to any other Banks for any amount then due and payable by such Defaulting Bank to such other Banks hereunder, ratably in accordance with such respective amounts then due and payable to such other Banks.

In the event that any Bank that is a Defaulting Bank shall, at any time, cease to be a Defaulting Bank, any funds held by the Administrative Agent in escrow at such time with respect to such Bank shall be distributed by the Administrative Agent to such Bank and applied by such Bank to the Obligations owing to such Bank at such time under this Agreement and the other Loan Documents ratably in accordance with the respective amounts of such Obligations outstanding at such time.

(c) The rights and remedies against a Defaulting Bank under this Section 2.11 are in addition to other rights and remedies that any Agent or any Bank may have against such Defaulting Bank with respect to any Defaulted Amount.

2.12 Replacement of Affected Bank. At any time any Bank is an Affected Bank, the Account Parties may replace such Affected Bank as a party to this Agreement with one or more other Banks and/or Eligible Assignees, and upon notice from the Account Parties such Affected Bank shall assign pursuant to an Assignment and Acceptance, and without recourse or warranty, its LC Commitment Amount, its Letter of Credit Advances, its obligations to fund Letter of Credit payments, its participation in, and its rights and obligations with respect to, Letters of Credit, and all of its other rights and obligations hereunder to such other Banks and/or Eligible Assignees for a purchase price equal to the sum of the principal amount of the Letter of Credit Advances so assigned, all accrued and unpaid interest thereon, such Affected Bank’s ratable share of all accrued and unpaid fees payable pursuant to Section 2.05 and all other Obligations owed to such Affected Bank hereunder.

2.13 Certain Provisions Relating to the Issuing Banks and Letters of Credit.

(a) Letter of Credit Agreements. The representations, warranties and covenants by the Account Parties under, and the rights and remedies of each Issuing Bank under, any Letter of Credit Agreement relating to any Letter of Credit are in addition to, and not in limitation or derogation of, representations, warranties and covenants by the Account Parties under, and rights and remedies of each Issuing Bank and the Banks under, this Agreement and applicable law. Each Account Party acknowledges and agrees that all rights of each Issuing Bank under any Letter of Credit Agreement shall inure to the benefit of each Bank to the extent of its Letter of Credit Participating Interest Commitment and Letter of Credit Advances as fully as if such Bank

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was a party to such Letter of Credit Agreement. In the event of any inconsistency between the terms of this Agreement and any Letter of Credit Agreement, this Agreement shall prevail.

(b) Certain Provisions. The Issuing Banks shall have no duties or responsibilities to any Agent or any Bank except those expressly set forth in this Agreement, and no implied duties or responsibilities on the part of the Issuing Banks shall be read into this Agreement or shall otherwise exist. The duties and responsibilities of the Issuing Banks to the Banks and the Agents under this Agreement and the other Loan Documents shall be mechanical and administrative in nature, and the Issuing Banks shall not have a fiduciary relationship in respect of any Agent, any Bank or any other Person. No Issuing Bank shall be liable for any action taken or omitted to be taken by it under or in connection with this Agreement or any Loan Document or Letter of Credit, except to the extent resulting from its gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction. The Issuing Banks shall not be under any obligation to ascertain, inquire or give any notice to any Agent or any Bank relating to (i) the performance or observance of any of the terms or conditions of this Agreement or any other Loan Document on the part of any Account Party, (ii) the business, operations, condition (financial or otherwise) or prospects of the Account Parties or any other Person, or (iii) the existence of any Default. The Issuing Banks shall not be under any obligation, either initially or on a continuing basis, to provide any Agent or any Bank with any notices, reports or information of any nature, whether in its possession presently or hereafter, except for such notices, reports and other information expressly required by this Agreement to be so furnished. The Issuing Banks shall not be responsible for the execution, delivery, effectiveness, enforceability, genuineness, validity or adequacy of this Agreement or any Loan Document.

(c) Administration. Each Issuing Bank may rely upon any notice or other communication of any nature (written, electronic or oral, including but not limited to telephone conversations and transmissions through each Issuing Bank’s remote access system, whether or not such notice or other communication is made in a manner permitted or required by this Agreement or any other Loan Document) purportedly made by or on behalf of the proper party or parties, and each Issuing Bank shall not have any duty to verify the identity or authority of any Person giving such notice or other communication. Each Issuing Bank may consult with legal counsel (including, without limitation, its in-house counsel or in-house or other counsel for the Account Parties), independent public accountants and any other experts selected by it from time to time, and each Issuing Bank shall not be liable for any action taken or omitted to be taken in good faith in accordance with the advice of such counsel, accountants or experts. Whenever an Issuing Bank shall deem it necessary or desirable that a matter be proved or established with respect to any Account Party, any Agent or any Bank, such matter may be established by a certificate of such Account Party, such Agent or such Bank, as the case may be, and such Issuing Bank may conclusively rely upon such certificate. An Issuing Bank shall not be deemed to have any knowledge or notice of the occurrence of any Default unless such Issuing Bank has received notice from a Bank, an Agent or an Account Party referring to this Agreement, describing such Default, and stating that such notice is a “notice of default”.

(d) Indemnification of Issuing Banks by Banks. Each Bank hereby agrees to reimburse and indemnify each Issuing Bank and each of its directors, officers, employees and agents (to the extent not reimbursed by the Account Parties and without limitation of the obligations of the Account Parties to do so), in accordance with its Pro Rata Share, from and

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against any and all amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature (including, without limitation, the reasonable fees and disbursements of counsel (other than in-house counsel) for each Issuing Bank or such other Person in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not each Issuing Bank or such other Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against each Issuing Bank, in its capacity as such, or such other Person, as a result of, or arising out of, or in any way related to or by reason of, this Agreement, any other Loan Document or any Letter of Credit, any transaction from time to time contemplated hereby or thereby, or any transaction financed in whole or in part or directly or indirectly with the proceeds of any Letter of Credit, provided, that no Bank shall be liable for any portion of such amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements to the extent resulting from the gross negligence or willful misconduct of an Issuing Bank or such other Person, as finally determined by a court of competent jurisdiction.

(e) Issuing Banks in their Individual Capacity. With respect to its commitments and the obligations owing to it, each Issuing Bank shall have the same rights and powers under this Agreement and each other Loan Document as any other Bank and may exercise the same as though it were not an Issuing Bank, and the term “Banks” and like terms shall include each Issuing Bank in its individual capacity as such. Each Issuing Bank and its affiliates may, without liability to account to any Person, make loans to, accept deposits from, acquire debt or equity interests in, act as trustee under indentures of, act as agent under other credit facilities for, and engage in any other business with, any Account Party and any stockholder, subsidiary or affiliate of any Account Party, as though such Issuing Bank were not an Issuing Bank hereunder.

2.14 Downgrade Event with Respect to a Bank.

(a) If a Downgrade Event shall occur with respect to (i) any Downgraded Bank or (ii) any other Bank and, as a result thereof, such other Bank becomes a Downgraded Bank, then the Administrative Agent may, by notice to such Downgraded Bank and the Parent within 45 days after such Downgrade Event (any such notice, a “Downgrade Notice”), request that the Account Parties use reasonable efforts to replace such Bank as a party to this Agreement pursuant to Section 2.12. If such Bank is not so replaced within 45 days after receipt by the Account Parties of such Downgrade Notice, then (x) if no Default exists and such Downgraded Bank has not exercised its right to remain a Bank hereunder pursuant to clause (y) below, the following shall occur concurrently:

(i) the Committed Facility shall be reduced by the amount of the LC Commitment Amount of such Downgraded Bank,

(ii) the Account Parties shall prepay all amounts owed to such Downgraded Bank hereunder or in connection herewith,

(iii) if, upon the reduction of the Committed Facility under clause (i) above and the payment under clause (ii) above, the sum of the principal amount of all Advances plus the Available Amount of all Letters of Credit (valuing the Available Amount of, and Letter of Credit Advances of the Issuing Banks in

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respect of, any Non-Dollar Letter of Credit at the Dollar Equivalent thereof as of the time of such calculation) would exceed the amount of the Committed Facility, then the Account Parties will immediately eliminate such excess by paying Advances and/or causing the Available Amount of one or more Letters of Credit to be reduced, and

(iv) upon completion of the events described in clauses (i), (ii) and (iii) above, such Downgraded Bank shall cease to be a party to this Agreement;

or (y) if a Default exists or, not later than 30 days after receipt of such Downgrade Notice, such Downgraded Bank notifies the Account Parties, the Issuing Banks and the Administrative Agent that such Downgraded Bank elects to provide (in a manner reasonably satisfactory to Administrative Agent) cash collateral to the Administrative Agent for (or if such Downgraded Bank is unable, without regulatory approval, to provide cash collateral, a letter of credit reasonably satisfactory to Administrative Agent covering) its contingent obligations to reimburse each Issuing Bank for any payment under any Letter of Credit as provided in Section 2.02(f) (its “LC Participation Obligations”), such Downgraded Bank shall be obligated to (and each Bank agrees that in such circumstances it will) deliver to the Administrative Agent (I) immediately, cash collateral (or, as aforesaid, a letter of credit) in an amount equal to its LC Participation Obligations and (II) from time to time thereafter (so long as it is a Downgraded Bank), cash collateral (or, as aforesaid, a letter of credit) sufficient to cover any increase in its LC Participation Obligations as a result of any proposed issuance of or increase in a Letter of Credit. Any funds provided by a Downgraded Bank for such purpose shall be maintained in segregated deposit accounts in the name of the Issuing Banks at the Administrative Agent’s principal offices in the United States (each a “Downgrade Account”). The funds so deposited in any Downgrade Account (or any drawing under such a letter of credit) shall be used only in accordance with the following provisions of this Section 2.14.

(b) If any Downgraded Bank shall be required to fund its participation in a payment under a Letter of Credit pursuant to Section 2.02(f), then the Administrative Agent shall apply the funds deposited in the applicable Downgrade Account by such Downgraded Bank (or any drawing under such a letter of credit) to fund such participation. The deposit of funds in a Downgrade Account by any Downgraded Bank (or any drawing under such a letter of credit) shall not constitute a Letter of Credit Advance (and the Downgraded Bank shall not be entitled to interest on such funds except as provided in Section 2.14(c) below) unless and until (and then only to the extent that) such funds (or any drawing under such a letter of credit) are used by the Administrative Agent to fund the participation of such Downgraded Bank pursuant to the first sentence of this Section 2.14(b).

(c) Funds in a Downgrade Account shall be invested in such investments as may be agreed between the Administrative Agent and the applicable Downgraded Bank, and the income from such investments shall be distributed to such Downgraded Bank from time to time (but not less often than monthly) as agreed between the Administrative Agent and such Downgraded Bank. The Administrative Agent will (i) from time to time, upon request by a Downgraded Bank, release to such Downgraded Bank any amount on deposit in the applicable Downgrade Account in excess of the LC Participation Obligations of such Downgraded Bank (or, if applicable, not draw under any such letter of credit in excess of the L/C Participation Obligations

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of such Downgraded Bank) and (ii) upon the earliest to occur of (A) the effective date of any replacement of such Downgraded Bank as a party hereto pursuant to an Assignment and Acceptance, (B) the termination of such Downgraded Bank’s LC Commitment Amount pursuant to Section 2.14(a) or (C) the first Business Day after receipt by the Administrative Agent of evidence (reasonably satisfactory to the Administrative Agent) that such Bank is no longer a Downgraded Bank, release to such Bank all amounts on deposit in the applicable Downgrade Account (or, if applicable, return such letter of credit to such Bank for cancellation).

(d) At any time any Downgraded Bank is required to maintain cash collateral with the Administrative Agent pursuant to this Section 2.14, the Issuing Banks shall have no obligation to issue or increase any Letter of Credit unless such Downgraded Bank has provided sufficient funds as cash collateral to the Administrative Agent to cover all LC Participation Obligations of such Downgraded Bank (including in respect of the Letter of Credit to be issued or increased).

2.15 Non-Dollar Letters of Credit.

(a) The Account Parties, the Administrative Agent, the Issuing Banks and the Banks (i) agree that an Issuing Bank may (in its sole discretion), with the prior approval of the Administrative Agent, issue Letters of Credit (“Non-Dollar Letters of Credit”) in currencies other than U.S. dollars and (ii) further agree as set forth in the following subsections of this Section 2.15 with respect to such Non-Dollar Letters of Credit.

(b) The Account Parties agree that their reimbursement obligations under Section 2.03(a) and any resulting Letter of Credit Advance, in each case in respect of a drawing under any Non-Dollar Letter of Credit, (i) shall be payable in Dollars at the Dollar Equivalent of such obligation in the currency in which such Non-Dollar Letter of Credit was issued (determined on the date of payment by the Account Parties or, in the event of payment by the Banks pursuant to Section 2.02(f), on the date of such payment by the Banks), and (ii) shall bear interest at a rate per annum equal to the Base Rate plus 2%, for each day from and including the date on which the Applicable Account Party is to reimburse an Issuing Bank pursuant to Section 2.03(a) to but excluding the date such obligation is paid in full.

(c) Each Bank agrees that its obligation to pay an Issuing Bank such Bank’s Pro Rata Share of the unreimbursed portion of any payment by such Issuing Bank under Section 2.02(f) in respect of a drawing under any Non-Dollar Letter of Credit shall be payable in Dollars at the Dollar Equivalent of such obligation in the currency in which such Non-Dollar Letter of Credit was issued (calculated on the date of payment), and any such amount which is not paid when due shall bear interest at a rate per annum equal to the Overnight Rate plus, beginning on the third Business Day after such amount was due, 2%.

(d) For purposes of determining whether there is availability for the Account Parties to request any Advance or to request the issuance or extension of, or any increase in, any Letter of Credit, the Dollar Equivalent amount of the Available Amount of each Non-Dollar Letter of Credit shall be calculated as of the date such Advance is to be made or such Letter of Credit is to be issued, extended or increased.

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(e) For purposes of determining the letter of credit fee under Section 2.05(c), the Dollar Equivalent amount of the Available Amount of any Non-Dollar Letter of Credit shall be determined on each of (i) the date of an issuance, extension or change in the Available Amount of such Non-Dollar Letter of Credit, (ii) the date of any payment by an Issuing Bank in respect of a drawing under such Non-Dollar Letter of Credit, (iii) the last Business Day of each March, June, September and December and (iv) each day on which the LC Commitment Amounts are to be reduced pursuant to Section 2.04 (it being understood that no requested reduction shall be permitted to the extent that, after making a calculation pursuant to this Section 2.15(e), such reduction would be greater than the unused portion of the LC Commitment Amounts).

(f) If, on the last Business Day of each March, June, September and December, the sum of the principal amount of all Advances plus the Available Amount of all Letters of Credit (valuing the Available Amount of, and Letter of Credit Advances in respect of, any Non-Dollar Letter of Credit at the Dollar Equivalent thereof as of such day) would exceed the amount of the Committed Facility, then the Account Parties will immediately eliminate such excess by paying Advances and/or causing the Available Amount of one or more Letters of Credit to be reduced.

(g) If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due in respect of any Non-Dollar Letter of Credit in one currency into another currency, the rate of exchange used shall be that at which, in accordance with its normal banking procedures, Wachovia in its capacity as an Issuing Bank could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given. The obligation of any Account Party in respect of any such sum due from it to any Issuing Bank or any Bank hereunder shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement and the applicable Non-Dollar Letter of Credit (the “Agreement Currency”), be discharged only to the extent that on the Business Day following receipt by such Issuing Bank or such Bank of any sum adjudged to be so due in the Judgment Currency, such Issuing Bank or such Bank may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency. If the amount of the Agreement Currency so purchased is less than the sum originally due to such Issuing Bank or such Bank in the Agreement Currency, the Applicable Account Party agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Issuing Bank or such Bank, as applicable, against such loss. If the amount of the Agreement Currency so purchased is greater than the sum originally due to such Issuing Bank or such Bank in such currency, each Issuing Bank and each Bank agrees to return the amount of any excess to the Applicable Account Party (or to any other Person who may be entitled thereto under applicable law).

(h) For purposes of this Section 2.15, “Dollar Equivalent” means, in relation to an amount denominated in a currency other than U.S. dollars, the amount of U.S. dollars which could be purchased with such amount by Wachovia in its capacity as an Issuing Bank in accordance with its customary procedures (and giving effect to any transaction costs) at the quoted foreign exchange spot rate of Wachovia in its capacity as an Issuing Bank at the time of determination; and “Overnight Rate” means, for any day, the rate of interest per annum at which overnight deposits in the applicable currency, in an amount approximately equal to the amount with respect to which such rate is being determined, would be offered for such day by Wachovia in its capacity as an Issuing Bank to major banks in the London or other applicable offshore

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interbank market. The Overnight Rate for any day which is not a Business Day (or on which dealings are not carried on in the applicable offshore interbank market) shall be the Overnight Rate for the immediately preceding Business Day.

2.16 Collateral.

(a) Pursuant to the Security Documents and as collateral security for the payment and performance of the Obligations, the Account Parties shall grant and convey, or cause to be granted and conveyed, to the Administrative Agent for its benefit and the benefit of the Banks, a Lien and security interest in, to and upon the Collateral, prior and superior to all other Liens. Each Account Party shall cause the Collateral to be charged or pledged and be made subject to the Security Documents (in form and substance acceptable to the Administrative Agent) necessary for the perfection of the Lien and security interest in, to and upon the Collateral and for the exercise by the Administrative Agent and the Banks of their rights and remedies hereunder and thereunder.

(b) (i) On the Business Day immediately preceding the proposed date of issuance or renewal of a Letter of Credit under Section 2.02(a), (ii) within ten (10) Business Days after the end of each calendar month, and (iii) at and as of such other times as the Administrative Agent or the Required Banks may reasonably request in its (or their) sole discretion, the Account Parties shall deliver or cause to be delivered to the Administrative Agent a certificate executed by the Parent, in the form of Exhibit B or otherwise in a form reasonably satisfactory to the Administrative Agent (which form may vary depending on the frequency of the delivery of such certificate), setting forth the Letter of Credit Outstandings, the Collateral Value of the Collateral by category and in the aggregate, and such other information as the Administrative Agent may reasonably request (such certificate, a “Collateral Value Report”). Such certificate shall be subject to review and verification by the Administrative Agent, it being understood and agreed that the Administrative Agent shall have the right to redetermine the Collateral Value of the Collateral in accordance with the terms and provisions of this Agreement and the Security Documents.

ARTICLE III

CONDITIONS OF LENDING AND ISSUANCES OF LETTERS OF CREDIT

3.01 Conditions Precedent to Effective Date. The occurrence of the Effective Date, and the obligation of the Issuing Banks to issue any Letter of Credit on the Effective Date, is subject to the satisfaction of the following conditions precedent:

(a) The Administrative Agent shall have received the following, each dated the Effective Date (unless otherwise specified), in form and substance reasonably satisfactory to the Administrative Agent (unless otherwise specified) and in sufficient copies for each Bank:

(i) Copies of (x) the Pledge and Security Agreement, duly completed and executed by each Account Party that is a party thereto, (y) the State Street Control Agreements, each duly completed and executed by State Street and by the Account Party that is a party thereto, and (z) the State Street Custodial Agreements.

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(ii) Certified copies of the resolutions of the Board of Directors of each Loan Party approving the transactions contemplated by the Loan Documents and each Loan Document to which it is or is to be a party, and of all documents evidencing other necessary corporate action and governmental and other third party approvals and consents, if any, with transactions contemplated by the Loan Documents and each Loan Document to which it is or is to be a party.

(iii) A copy of a certificate of the Secretary of State or other appropriate official of the jurisdiction of incorporation of each Loan Party, dated reasonably near the Effective Date, certifying as to the good standing (or existence) of such Loan Party.

(iv) A certificate of each Loan Party, signed on behalf of such Loan Party by its President or a Vice President (or equivalent officer if such Loan Party has no Vice President) and its Secretary or any Assistant Secretary (the statements made in which certificate shall be true on and as of the Effective Date), certifying as to (1) a true and correct copy of the constitutional documents of such Loan Party as in effect on the date on which the resolutions referred to in Section 3.01(a)(ii) were adopted and on the Effective Date, (2) the due incorporation and good standing or valid existence of such Loan Party as a corporation organized under the laws of the jurisdiction of its incorporation, and the absence of any proceeding for the dissolution or liquidation of such Loan Party, (3) the truth of the representations and warranties contained in the Loan Documents as though made on and as of the Effective Date and (4) the absence of any event occurring and continuing, or resulting from the Effective Date, that constitutes a Default.

(v) A certificate of the Secretary or an Assistant Secretary of each Loan Party certifying the names and true signatures of the officers of such Loan Party authorized to sign each Loan Document to which it is or is to be a party and the other documents to be delivered hereunder and thereunder.

(vi) Favorable opinions of (1) Maples and Calder, Cayman Islands counsel for the Parent, in substantially the form of Exhibit C-1 hereto and as to such other matters as any Bank through the Administrative Agent may reasonably request, (2) Mayer, Brown, Rowe & Maw LLP, New York counsel for the Loan Parties, in substantially the form of Exhibit C-2 hereto and as to such other matters as any Bank through the Administrative Agent may reasonably request, and (3) Conyers Dill & Pearman, Bermuda counsel for ACE Bermuda, Tempest Life and Tempest, in substantially the form of Exhibit C-3 hereto and as to such other matters as any Bank through the Administrative Agent may reasonably request.

(b) There shall exist no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries pending or threatened before any court, governmental agency or arbitrator that (x) would be reasonably expected to have a Material Adverse Effect or (y) would reasonably be expected to materially adversely affect the legality, validity or

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enforceability of any Loan Document or the other transactions contemplated by the Loan Documents.

(c) No development or change shall have occurred after December 31, 2003, and no information shall have become known after such date, that has had or would reasonably be expected to have a Material Adverse Effect.

(d) The Account Parties shall have paid all accrued fees of the Administrative Agent and the Banks and all accrued expenses of the Administrative Agent (including the accrued fees and expenses of counsel to the Administrative Agent and local counsel on behalf of all of the Banks), in each case to the extent then due and payable.

(e) The Administrative Agent shall have received evidence satisfactory to it that all obligations of any Account Party outstanding under the Existing Reimbursement Agreement and Existing Unsecured Reimbursement Agreement (other than fees and expenses of Wachovia’s counsel) and the Bilateral Agreements have been repaid and satisfied in full.

3.02 Conditions Precedent to Each Issuance, Extension or Increase of a Letter of Credit. The obligation of the Issuing Banks to issue, extend or increase a Letter of Credit (including any issuance on the Effective Date) shall be subject to the further conditions precedent that on the date of such issuance, extension or increase (a) the following statements shall be true (and each request for issuance, extension, or increase, and the acceptance by the Account Party that requested such issuance, extension or increase shall constitute a representation and warranty by such Account Party that both on the date of such notice and on the date of such issuance, extension or increase such statements are true):

(i) the representations and warranties contained in each Loan Document are correct in all material respects on and as of such date, before and after giving effect to such issuance, extension or increase, as though made on and as of such date, other than any such representations or warranties that, by their terms, refer to a specific date other the date of such issuance, extension or increase, in which case as of such specific date (provided, however, that the representation and warranty contained in the last sentence of Section 4.01(g) shall be excluded from this clause (i) at all times after (but shall be included on and as of) the Effective Date); and

(ii) no Default has occurred and is continuing, or would result from such issuance, extension or increase;

and (b) the Administrative Agent shall have received such other approvals, opinions or documents as any Bank or any Issuing Bank through the Administrative Agent may reasonably request.

3.03 Determinations Under Section 3.01. For purposes of determining compliance with the conditions specified in Section 3.01, each Bank shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Banks unless an officer of the Administrative Agent responsible for the transactions contemplated by the Loan Documents

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shall have received notice from such Bank prior to the Effective Date specifying its objection thereto, provided that such Bank has been given at least one Business Day’s notice that the final form of such document or matter is available for its review.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

4.01 Representations and Warranties of the Account Parties. Each Account Party represents and warrants as follows:

(a) Each Loan Party and each of its Material Subsidiaries (i) is duly organized or formed, validly existing and, to the extent such concept applies, in good standing under the laws of the jurisdiction of its incorporation or formation, (ii) is duly qualified and in good standing as a foreign corporation or other entity in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed would not be reasonably likely to have a Material Adverse Effect and (iii) has all requisite power and authority (including, without limitation, all governmental licenses, permits and other approvals) to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted, except where the failure to have any license, permit or other approval would not be reasonably likely to have a Material Adverse Effect. All of the outstanding Equity Interests in each Account Party (other than the Parent) have been validly issued, are fully paid and non-assessable and (except for any Preferred Securities issued after the date of this Agreement) are owned, directly or indirectly, by the Parent free and clear of all Liens.

(b) Set forth on Schedule 4.01(b) hereto is a complete and accurate list of all Subsidiaries of each Loan Party as of the Effective Date.

(c) The execution, delivery and performance by each Loan Party of each Loan Document to which it is or is to be a party and the consummation of the transactions contemplated by the Loan Documents, are within such Loan Party’s corporate powers, have been duly authorized by all necessary corporate action, and do not (i) contravene such Loan Party’s constitutional documents, (ii) violate any law, rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties or (iv) except for the Liens created under the Loan Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. No Loan Party or any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, the violation or breach of which would be reasonably likely to have a Material Adverse Effect.

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(d) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by any Loan Party of any Loan Document to which it is or is to be a party or the other transactions contemplated by the Loan Documents, or (ii) the exercise by the Administrative Agent or any Bank of its rights under the Loan Documents, except for the authorizations, approvals, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect, subject to bankruptcy, insolvency and similar laws of general application relating to creditors’ rights and to general principles of equity.

(e) This Agreement has been, and each other Loan Document when delivered hereunder will have been, duly executed and delivered by each Loan Party party thereto. This Agreement is, and each other Loan Document when delivered hereunder will be, the legal, valid and binding obligation of each Loan Party party thereto, enforceable against such Loan Party in accordance with its terms.

(f) There is no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries, including any Environmental Action, pending or, to such Loan Party’s knowledge, threatened before any court, governmental agency or arbitrator that (i) would be reasonably likely to have a Material Adverse Effect or (ii) would reasonably be expected to affect the legality, validity or enforceability of any Loan Document or the transactions contemplated by the Loan Documents.

(g) The Consolidated balance sheet of the Parent and its Subsidiaries as at December 31, 2003, and the related Consolidated statements of income and of cash flows of the Parent and its Subsidiaries for the fiscal year then ended, accompanied by an unqualified opinion of PricewaterhouseCoopers LLP, independent public accountants, and the Consolidated balance sheet of the Parent and its Subsidiaries as at June 30, 2004, and the related Consolidated statements of income and cash flows of the Parent and its Subsidiaries for the six months then ended, duly certified by the Chief Financial Officer of the Parent, copies of which have been furnished to each Bank, fairly present, subject, in the case of said balance sheet as at June 30, 2004, and said statements of income and cash flows for the six months then ended, to year-end audit adjustments, the Consolidated financial condition of the Parent and its Subsidiaries as at such dates and the Consolidated results of operations of the Parent and its Subsidiaries for the periods ended on such dates, all in accordance with GAAP applied on a consistent basis (subject, in the case of the June 30, 2004 balance sheet and statements of income and cash flows, to the absence of footnotes). Since December 31, 2003, there has been no Material Adverse Change.

(h) The Parent has delivered to the Administrative Agent a true and correct copy of each State Street Custodial Agreement as in effect as of the date of this Agreement. Each State Street Custodial Agreement is in full force and effect and no default or event of default by any Account Party exists thereunder.

(i) No written information, exhibit or report furnished by or on behalf of any Loan Party to any Agent or any Bank in connection with the negotiation and syndication of the Loan Documents or pursuant to the terms of the Loan Documents contained any untrue statement of a

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material fact or omitted to state a material fact necessary to make the statements made therein not misleading as at the date it was dated (or if not dated, so delivered).

(j) Margin Stock constitutes less than 25% of the value of those assets of any Account Party which are subject to any limitation on sale, pledge or other disposition hereunder. None of the Collateral constitutes or will constitute Margin Stock.

(k) Neither any Loan Party nor any of its Subsidiaries is an “investment company”, or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company”, as such terms are defined in the Investment Company Act of 1940, as amended. Neither the making of any Advances, nor the issuance of any Letters of Credit, nor the application of the proceeds or repayment thereof by any Account Party, nor the consummation of the other transactions contemplated by the Loan Documents, will violate any provision of such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder.

(l) Each Loan Party is, individually and together with its Subsidiaries, Solvent.

(m) Except to the extent that any and all events and conditions under clauses (i) through (v) below of this Section 4.01(m) in the aggregate are not reasonably expected to have a Material Adverse Effect:

(i) Neither any Loan Party nor any ERISA Affiliate has incurred or is reasonably expected to incur any Withdrawal Liability to any Multiemployer Plan.

(ii) With respect to each scheme or arrangement mandated by a government other than the United States (a “Foreign Government Scheme or Arrangement”) and with respect to each employee benefit plan that is not subject to United States law maintained or contributed to by any Loan Party or with respect to which any Subsidiary of any Loan Party may have liability under applicable local law (a “Foreign Plan”):

(A) Any employer and employee contributions required by law or by the terms of any Foreign Government Scheme or Arrangement or any Foreign Plan have been made, or, if applicable, accrued, in accordance with normal accounting practices.

(B) The fair market value of the assets of each funded Foreign Plan, the liability of each insurer for any Foreign Plan funded through insurance or the book reserve established for any Foreign Plan, together with any accrued contributions, is sufficient to procure or provide for the accrued benefit obligations, as of the date hereof, with respect to all current and former participants in such Foreign Plan according to the actuarial assumptions and valuations most recently used to account for such obligations in accordance with applicable generally accepted accounting principles.

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(C) Each Foreign Plan required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities.

(iii) During the twelve-consecutive-month period to the date of the execution and delivery of this Agreement and prior to the request for any Letter of Credit to be issued hereunder, no steps have been taken to terminate any Pension Plan, no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a lien under section 302(f) of ERISA and no minimum funding waiver has been applied for or is in effect with respect to any Pension Plan. No condition exists or event or transaction has occurred or is reasonably expected to occur with respect to any Pension Plan which could result in any Loan Party or any ERISA Affiliate incurring any material liability, fine or penalty.

(iv) Each Pension Plan is in compliance in all respects with the applicable provisions of ERISA, the Internal Revenue Code and other federal or state laws.

(v) No assets of any Loan Party are or are deemed under applicable law to be “plan assets” within the meaning of Department of Labor Regulation §2510.3-101.

(n) In the ordinary course of its business, each Account Party reviews the effect of Environmental Laws on the operations and properties of such Account Party and its Subsidiaries, in the course of which it identifies and evaluates associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by law or as a condition of any license, permit or contract, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat, and any actual or potential liabilities to third parties and any related costs and expenses). On the basis of this review, each Account Party has reasonably concluded that such associated liabilities and costs, including the costs of compliance with Environmental Laws, are unlikely to have a Material Adverse Effect. The operations and properties of each Loan Party and each of its Subsidiaries comply in all material respects with all applicable Environmental Laws and Environmental Permits, except for non-compliances which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; Hazardous Materials have not been released, discharged or disposed of on any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries that would reasonably be expected to have a Material Adverse Effect; and there are no Environmental Actions pending or threatened against any Loan Party or its Subsidiaries, and no circumstances exist that could be reasonably likely to form the basis of any such Environmental Action, which (in either case), individually or in the aggregate with all other such pending or threatened actions and circumstances, would reasonably be expected to have a Material Adverse Effect.

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(o) Each Loan Party and each of its Subsidiaries has filed, has caused to be filed or has been included in all material federal tax returns and all other material tax returns required to be filed and has paid all taxes shown thereon to be due, together with applicable interest and penalties, except to the extent contested in good faith and by appropriate proceedings (in which case adequate reserves have been established therefor in accordance with GAAP).

(p) Set forth on Schedule II hereto is a list of all letters of credit that were issued (or deemed issued) under the Existing Reimbursement Agreement and that are outstanding as of the Effective Date.

ARTICLE V

COVENANTS OF THE ACCOUNT PARTIES

5.01 Affirmative Covenants. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Bank shall have any Letter of Credit Participating Interest Commitment or commitment to issue a Letter of Credit hereunder, each Account Party will:

(a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with Environmental Laws, Environmental Permits, ERISA and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, all material taxes, assessments and governmental charges or levies imposed upon it or upon its property; provided, however, that neither any Account Party nor any of its Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or levy that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained.

(c) Maintenance of Insurance. Maintain, and cause each of its Material Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Parent or such Material Subsidiary operates (it being understood that the foregoing shall not apply to maintenance of reinsurance or similar matters which shall be solely within the reasonable business judgment of the Parent and its Subsidiaries).

(d) Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each of its Material Subsidiaries to preserve and maintain, its existence, legal structure, legal name, rights (charter and statutory), permits, licenses, approvals, privileges and franchises; provided, however, that (i) the Parent and its Subsidiaries may consummate any merger or amalgamation or consolidation permitted under Section 5.02(c), (ii) no Subsidiary (other than an Account Party) shall be required to preserve and maintain its existence, legal structure, legal names or other rights (charter and statutory) if the Board of Directors of a direct or indirect parent of such

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Subsidiary has determined that such action is not disadvantageous in any material respect to the Parent, such parent or the Banks, and (iii) neither the Parent nor any of its Subsidiaries shall be required to preserve any right, permit, license, approval, privilege or franchise if the Board of Directors of the Parent or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Parent or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to the Parent, such Subsidiary or the Banks.

(e) Visitation Rights. At any reasonable time and from time to time upon not less than three Business Days prior notice, permit the Administrative Agent (upon request made by any Agent or any Bank), or any agents or representatives thereof, at the expense (so long as no Default has occurred and is continuing) of such Agent or such Bank, as the case may be, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Parent and any of its Subsidiaries, and to discuss the affairs, finances and accounts of the Parent and any of its Subsidiaries with any of their officers or directors and with, so long as a representative of the Parent is present, their independent certified public accountants; provided that neither the Parent nor any of its Subsidiaries shall be required to disclose any information that it reasonably determines is entitled to the protection of attorney-client privilege.

(f) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Parent and each such Subsidiary sufficient to permit the preparation of financial statements in accordance with GAAP.

(g) Maintenance of Properties, Etc. Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted, except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect.

(h) Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of their Affiliates (other than any such transactions between Loan Parties or wholly owned Subsidiaries of Loan Parties) on terms that are fair and reasonable and no less favorable than it would obtain in a comparable arm’s-length transaction with a Person not an Affiliate.

(i) Pari Passu Ranking. Ensure that at all times the claims of the Banks, the Issuing Banks and the Agents against it under the Loan Documents will rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for claims which are preferred by any bankruptcy, insolvency, liquidation or other similar laws of general application or are mandatorily preferred by law applying to insurance companies generally.

(j) Additional Collateral. Comply with the provisions of this Section regarding any new or additional Collateral. The Account Parties may from time to time add Collateral to the State Street Custodial Accounts without the necessity of executing or delivering any documents pursuant to this Agreement (but subject to the provisions of Section 5.02(g)). The Account

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Parties may from time to time pledge new or additional Collateral contained in Custodial Accounts other than the State Street Custodial Accounts by executing and delivering to the Administrative Agent either a supplement to the Pledge and Security Agreement in the form attached thereto (in the case of any new Custodial Account maintained with State Street), or a new pledge and security agreement (in substantially the form of the Pledge and Security Agreement) or other pledge agreement, security agreement or charge (in the case of any new Custodial Account maintained with another Custodian), in form and substance reasonably satisfactory to the Administrative Agent, and by causing to be executed and delivered to the Administrative Agent a control agreement or such other Security Documents as the Administrative Agent shall reasonably require together with such other documents, certificates and opinions (including opinions as to the validity and perfection of the Administrative Agent’s Lien on such Collateral), in form and substance reasonably satisfactory to the Administrative Agent, as the Administrative Agent may reasonably request in connection therewith; and the applicable Account Parties will take such other action as the Administrative Agent may reasonably request to create in favor of the Administrative Agent a perfected security interest in and Lien on the Collateral being pledged pursuant to the documents described above.

(k) Custodial Account Statements. Cause to be delivered to the Administrative Agent, promptly upon receipt after the end of each calendar month, a monthly statement of each Custodial Account prepared by the Custodian thereof, showing the assets credited to such account as of the date of such statement.

5.02 Negative Covenants. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Bank shall have any Letter of Credit Participating Interest Commitment or commitment to issue a Letter of Credit hereunder, each of the Account Parties will not, at any time:

(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, or assign or permit any of its Subsidiaries to assign, any accounts or other right to receive income, except:

(i) Permitted Liens;

(ii) Liens described on Schedule 5.02(a) hereto;

(iii) purchase money Liens upon any property acquired or held by the Parent or any of its Subsidiaries in the ordinary course of business to secure the purchase price of such property or to secure Debt incurred solely for the purpose of financing the acquisition, construction or improvement of any property to be subject to such Liens, or Liens existing on any property at the time of acquisition or within 180 days following such acquisition (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price), or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount; provided, however, that no such Lien shall extend to or cover any

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property other than the property being acquired, constructed or improved, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced;

(iv) Liens arising in connection with Capitalized Leases; provided that no such Lien shall extend to or cover any assets other than the assets subject to such Capitalized Leases;

(v) (A) any Lien existing on any asset of any Person at the time such Person becomes a Subsidiary and not created in contemplation of such event, (B) any Lien on any asset of any Person existing at the time such Person is merged or consolidated with or into the Parent or any of it Subsidiaries in accordance with Section 5.02(c) and not created in contemplation of such event and (C) any Lien existing on any asset prior to the acquisition thereof by the Parent or any of its Subsidiaries and not created in contemplation of such acquisition;

(vi) Liens securing obligations under credit default swap transactions determined by reference to, or Contingent Obligations in respect of, Debt issued by the Parent or one of its Subsidiaries; such Debt not to exceed an aggregate principal amount of $550,000,000;

(vii) Liens arising in the ordinary course of its business which (A) do not secure Debt and (B) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business;

(viii) Liens on cash and Approved Investments securing Hedge Agreements arising in the ordinary course of business;

(ix) other Liens securing Debt or other obligations outstanding in an aggregate principal or face amount not to exceed at any time 5% of Consolidated Net Worth;

(x) Liens consisting of deposits made by the Parent or any insurance Subsidiary with any insurance regulatory authority or other statutory Liens or Liens or claims imposed or required by applicable insurance law or regulation against the assets of the Parent or any insurance Subsidiary, in each case in favor of policyholders of the Parent or such insurance Subsidiary or an insurance regulatory authority and in the ordinary course of the Parent’s or such insurance Subsidiary’s business;

(xi) Liens on Investments and cash balances of the Parent or any insurance Subsidiary (other than capital stock of any Subsidiary) securing obligations of the Parent or any insurance Subsidiary in respect of (i) letters of credit obtained in the ordinary course of business (including, without limitation, Liens created by the Security Documents) and/or (ii) trust arrangements formed in the ordinary course of business for the benefit of cedents to secure reinsurance recoverables owed to them by the Parent or any insurance Subsidiary;

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(xii) the replacement, extension or renewal of any Lien permitted by clause (ii) or (v) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal (without increase in the amount (other than in respect of fees, expenses and premiums, if any) or change in any direct or contingent obligor) of the Debt secured thereby;

(xiii) Liens securing obligations owed by any Loan Party to any other Loan Party or owed by any Subsidiary of the Parent (other than a Loan Party) to the Parent or any other Subsidiary;

(xiv) Liens incurred in the ordinary course of business in favor of financial intermediaries and clearing agents pending clearance of payments for investment or in the nature of set-off, banker’s lien or similar rights as to deposit accounts or other funds;

(xv) judgment or judicial attachment Liens, provided that the enforcement of such Liens is effectively stayed;

(xvi) Liens arising in connection with Securitization Transactions; provided that the aggregate principal amount of the investment or claim held at any time by all purchasers, assignees or other transferees of (or of interests in) receivables and other rights to payment in all Securitization Transactions (together with the aggregate principal amount of any other obligations secured by such Liens) shall not exceed U.S. $750,000,000;

(xvii) Liens on securities arising out of repurchase agreements with a term of not more than three months entered into with “Lenders” (as such term is defined in the JPMorgan Credit Agreement) or their Affiliates or with securities dealers of recognized standing; provided that the aggregate amount of all assets of the Parent and its Subsidiaries subject to such agreements shall not at any time exceed $1,000,000,000. For purposes of this clause (xvii), “JPMorgan Credit Agreement” shall mean the Three-Year Credit Agreement dated as of April 2, 2004 among the Parent, ACE Bermuda, Tempest, and ACE INA Holdings Inc., as borrowers, various financial institutions, and JPMorgan Chase Bank, as administrative agent, as amended, modified, supplemented or restated from time to time; and

(xviii) Liens securing up to an aggregate amount of $200,000,000 of obligations of the Parent or any wholly owned Subsidiary, arising out of catastrophe bond financing.

Notwithstanding the foregoing provisions of this Section 5.02(a) or any other provision of this Agreement or any other Loan Document, in no event shall any Account Party create, incur, assume or suffer to exist any Lien on or with respect to the Collateral or any portion thereof other than (w) the Liens created in favor of the Administrative Agent under the Security Documents, (x) Liens described in clause (a) of the definition of Permitted Liens, (y) Liens described in clause (xv) above, and (z) Liens in favor of any Custodian pursuant to such

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Custodian’s standard Custodial Agreements securing payment of such Custodian’s customary fees, commissions and charges (the Liens described in clauses (w), (x), (y) and (z), collectively, “Permitted Collateral Liens”).

(b) Change in Nature of Business. Make any material change in the nature of the business of the Parent and its Material Subsidiaries, taken as a whole, as carried on at the date hereof.

(c) Mergers, Etc. Merge into or amalgamate or consolidate with any Person or permit any Person to merge into it, or permit any of its Subsidiaries to do so, except that:

(i) any Subsidiary of the Parent may merge into or amalgamate or consolidate with any other Subsidiary of the Parent, provided that, in the case of any such merger, amalgamation or consolidation, the Person formed by such merger, amalgamation or consolidation shall be a wholly owned Subsidiary of the Parent, provided further that, in the case of any such merger, amalgamation or consolidation to which an Account Party is a party, the Person formed by such merger, amalgamation or consolidation shall be such Account Party;

(ii) any Subsidiary of any Account Party may merge into or amalgamate or consolidate with any other Person or permit any other Person to merge into, amalgamate or consolidate with it; provided that the Person surviving such merger, amalgamation or consolidation shall be a wholly owned Subsidiary of the Account Party;

(iii) in connection with any sale or other disposition permitted under Section 5.02(d), any Subsidiary of the Parent may merge into or amalgamate or consolidate with any other Person or permit any other Person to merge into or amalgamate or consolidate with it; and

(iv) the Parent or any Account Party may merge into or amalgamate or consolidate with any other Person; provided that, in the case of any such merger, amalgamation or consolidation, the Person formed by such merger, amalgamation or consolidation shall be the Parent or such Account Party, as the case may be;

provided, however, that in each case, immediately after giving effect thereto, no event shall occur and be continuing that constitutes a Default.

(d) Sales, Etc., of Assets. Sell, lease, transfer or otherwise dispose of, or permit any other Account Party to sell, lease, transfer or otherwise dispose of, all or substantially all of its assets (excluding sales of investment securities in the ordinary course of business); provided, however, that the provisions of Section 5.02(g) shall apply independent of this Section 5.02(d).

(e) Restricted Payments. Declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Interests now or hereafter outstanding, return any capital to its stockholders, partners or members (or the equivalent Persons thereof) as such, make any distribution of assets, Equity Interests, obligations or securities to its stockholders, partners or members (or the equivalent Persons thereof) as such or issue or sell any

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Equity Interests or accept any capital contributions, or permit any of its Subsidiaries to do any of the foregoing, or permit any of its Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value any Equity Interests in the Parent or to issue or sell any Equity Interests therein, if in any case referred to above, a Default shall have occurred and be continuing at the time of such action or would result therefrom.

(f) Accounting Changes. Make or permit, or permit any of its Subsidiaries to make or permit, any change in accounting policies or reporting practices, except as permitted by GAAP.

(g) Collateral. Permit (i) the Letter of Credit Outstandings to exceed the aggregate Collateral Value at any time or (ii) the average rating (calculated on a weighted average basis) of the securities included within the calculation of the aggregate Collateral Value to be less than “A-” (with rating methodologies to be taken into account in the manner set forth in Schedule III). The Account Parties may from time to time add Collateral to or sell, deliver, transfer or otherwise withdraw Collateral from any Custodial Account (including, without limitation, by trading of securities), but only so long as (i) immediately after giving effect thereto no Default or Event of Default would exist and (ii) with respect to the addition or termination (or removal as Collateral) of Custodial Accounts, the Account Parties comply with any applicable restrictions and conditions set forth in the Security Documents.

(h) Custodial Agreements. Make or permit any amendment or modification to any Custodial Agreement that is adverse in any material respect to the interests of the Account Parties or the Banks.

5.03 Reporting Requirements. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Bank shall have any Letter of Credit Participating Interest Commitment or commitment to issue a Letter of Credit hereunder, the Parent will furnish to the Agents and the Banks:

(a) Default Notice. As soon as possible and in any event within five days after the occurrence of each Default or any event, development or occurrence reasonably likely to have a Material Adverse Effect continuing on the date of such statement, a statement of the chief financial officer of the Parent setting forth details of such Default, event, development or occurrence and the action that the Parent or the applicable Subsidiary has taken and proposes to take with respect thereto.

(b) Annual Financials.

(i) As soon as available and in any event within 90 days after the end of each Fiscal Year (or, if earlier, within five Business Days after such date as the Parent is required to file its annual report on Form 10-K for such Fiscal Year with the Securities and Exchange Commission), a copy of the annual Consolidated audit report for such year for the Parent and its Subsidiaries, including therein a Consolidated balance sheet of the Parent and its Subsidiaries as of the end of such Fiscal Year and Consolidated statements of income and cash flows of the Parent

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and its Subsidiaries for such Fiscal Year, all reported on in a manner reasonably acceptable to the Securities and Exchange Commission in each case and accompanied by an opinion of PricewaterhouseCoopers LLP or other independent public accountants of recognized standing reasonably acceptable to the Required Banks, together with (i) a certificate of the Chief Financial Officer, Chief Accounting Officer or Chief Compliance Officer of the Parent stating that no Default has occurred and is continuing, or if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Parent has taken a proposes to take with respect thereto, and (ii) a schedule in form reasonably satisfactory to the Administrative Agent of the computations used by the Parent in determining, as of the end of such Fiscal Year, compliance with the covenants contained in Section 5.04 (which schedule shall include a statement as to the ratio of the aggregate Collateral Value to the Letter of Credit Outstandings as of the end of each calendar month during the period covered by such financial statements, to the extent not previously furnished to the Agents and the Banks).

(ii) As soon as available and in any event within 120 days after the end of each Fiscal Year, a copy of the annual Consolidated audit report for such year for each Subsidiary Guarantor and its Subsidiaries, including therein a Consolidated balance sheet of such Subsidiary Guarantor and its Subsidiaries as of the end of such Fiscal Year and a Consolidated statement of income and a Consolidated statement of cash flows of such Subsidiary Guarantor and its Subsidiaries for such Fiscal Year, in each case accompanied by an opinion acceptable to the Required Banks of PricewaterhouseCoopers LLP or other independent public accountants of recognized standing acceptable to the Required Banks.

(c) Quarterly Financials. As soon as available and in any event within 45 days after the end of each of the first three quarters of each Fiscal Year (or, if earlier, within five Business Days after such date as the Parent is required to file its quarterly report on Form 10-Q for such fiscal quarter with the Securities and Exchange Commission), Consolidated balance sheets of the Parent and its Subsidiaries as of the end of such quarter and Consolidated statements of income and a Consolidated statement of cash flows of the Parent and its Subsidiaries for the period commencing at the end of the previous fiscal quarter and ending with the end of such fiscal quarter and Consolidated statements of income and a Consolidated statement of cash flows of the Parent and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding date or period of the preceding Fiscal Year, all in reasonable detail and duly certified (subject to the absence of footnotes and normal year-end audit adjustments) by the Chief Financial Officer, Chief Accounting Officer or Chief Compliance Officer of the Parent as having been prepared in accordance with GAAP, together with (i) a certificate of said officer stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Parent has taken and proposes to take with respect thereto and (ii) a schedule in form reasonably satisfactory to the Administrative Agent of the computations used by the Parent in determining compliance with the covenants contained in Section 5.04 (which schedule shall include a

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statement as to the ratio of the aggregate Collateral Value to the Letter of Credit Outstandings as of the end of each calendar month during the period covered by such financial statements).

(d) Litigation. Promptly after the commencement thereof, notice of all actions, suits, investigations, litigation and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting any Loan Party or any of its Subsidiaries of the type described in Section 4.01(f).

(e) Securities Reports. Promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports that the Parent sends to its stockholders generally, copies of all regular, periodic and special reports, and all registration statements, that any Loan Party or any of its Subsidiaries files with the Securities and Exchange Commission or any governmental authority that may be substituted therefor, or with any national securities exchange.

(f) ERISA.

(i) ERISA Events. Promptly and in any event within 10 days after any Loan Party or any ERISA Affiliate institutes any steps to terminate any Pension Plan or becomes aware of the institution of any steps or any threat by the PBGC to terminate any Pension Plan, or the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a lien under section 302(f) of ERISA, or the taking of any action with respect to a Pension Plan which could result in the requirement that any Loan Party or any ERISA Affiliate furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan which could result in any Loan Party or any ERISA Affiliate incurring any material liability, fine or penalty, or any material increase in the contingent liability of any Loan Party or any ERISA Affiliate with respect to any post-retirement Welfare Plan benefit, notice thereof and copies of all documentation relating thereto.

(ii) Plan Annual Reports. Promptly upon request of any Agent or any Bank, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Pension Plan.

(iii) Multiemployer Plan Notices. Promptly and in any event within 15 Business Days after receipt thereof by any Loan Party or any ERISA Affiliate from the sponsor of a Multiemployer Plan, copies of each notice concerning (A) the imposition of Withdrawal Liability by any such Multiemployer Plan, (B) the reorganization or termination, within the meaning of Title IV of ERISA, of any such Multiemployer Plan or (C) the amount of liability incurred, or that may be incurred, by such Loan Party or any ERISA Affiliate in connection with any event described in clause (A) or (B); provided, however, that such notice and documentation shall not be required to be provided (except at the specific request of any Agent or any Bank, in which case such notice and documentation shall be promptly provided following such request) if such condition or event is not

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reasonably expected to result in any Loan Party or any ERISA Affiliate incurring any material liability, fine, or penalty.

(g) Statutory Statements. As soon as available and in any event within 20 days after submission, each statutory statement of the Loan Parties (or any of them) in the form submitted to the Supervisor of Insurance, the Insurance Division of the Bermuda Monetary Authority.

(h) Regulatory Notices, Etc. Promptly after any Responsible Officer of the Parent obtains knowledge thereof, (i) a copy of any notice from the Bermuda Minister of Finance or the Registrar of Companies or any other person of the revocation, the suspension or the placing of any restriction or condition on the registration as an insurer of any Account Party under the Bermuda Insurance Act 1978 (and related regulations) or of the institution of any proceeding or investigation which could result in any such revocation, suspension or placing of such a restriction or condition, (ii) copies of any correspondence by, to or concerning any Loan Party relating to an investigation conducted by the Bermuda Minister of Finance, whether pursuant to Section 132 of the Bermuda Companies Act 1981 (and related regulations) or otherwise and (iii) a copy of any notice of or requesting or otherwise relating to the winding-up or any similar proceeding of or with respect to any Loan Party.

(i) Other Information. Such other information respecting the business, condition (financial or otherwise), operations, performance, properties or prospects of any Loan Party or any of its Subsidiaries as the Administrative Agent, or any Bank through the Administrative Agent, may from time to time reasonably request. Information required to be delivered pursuant to Sections 5.03(b), 5.03(c), and 5.03(e) shall be deemed to have been delivered on the date on which the Parent provides notice to the Administrative Agent that such information has been posted on the Parent’s website on the Internet at the website address listed on the signature pages hereof, at sec.gov/edaux.searches.htm or at another website identified in such notice and accessible by the Banks without charge; provided that (x) such notice may be included in a certificate delivered pursuant to Section 5.03(b)(i)(A) or 5.01(c)(i) and (y) the Parent shall deliver paper copies of the information referred to in Sections 5.03(b), 5.03(c), and 5.03(e) to any Bank which requests such delivery.

5.04 Financial Covenants. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Bank shall have any Letter of Credit Participating Interest Commitment or commitment to issue a Letter of Credit hereunder, the Parent will:

(a) Adjusted Consolidated Debt to Total Capitalization Ratio. Maintain at all times a ratio of Adjusted Consolidated Debt to Total Capitalization of not more than 0.35 to 1.0.

(b) Consolidated Net Worth. Maintain at all times Consolidated Net Worth in an amount not less than the Minimum Amount. For this purpose, the “Minimum Amount” is an amount equal to the sum of (i) the Base Amount plus (ii) (A) 25% of Consolidated Net Income for each fiscal quarter of the Parent, ending on or after the date on which the current Base Amount became effective and before the last day of the current Fiscal Year, for which such Consolidated Net Income is positive and (B) 50% of any increase in Consolidated Net Worth during such period attributable to the issuance of ordinary and preferred shares. The “Base

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Amount” shall be $6,000,000,000 as of December 31, 2003 and shall be reset on the last day of each Fiscal Year to equal the greater of (x) 70% of Consolidated Net Worth as of the last day of such Fiscal Year and (y) the Minimum Amount in effect immediately prior to such last day.

ARTICLE VI

EVENTS OF DEFAULT

6.01 Events of Default. If any of the following events (“Events of Default”) shall occur and be continuing:

(a) (i) any Account Party shall fail to pay any reimbursement obligation in respect of any Advance made by any Issuing Bank pursuant to a Letter of Credit when and as the same shall become due and payable, or (ii) any Account Party shall fail to make any payment of interest on such Advance or of any other amount payable by such Account Party under any Loan Document, in each case under this clause (ii) within five Business Days after the same becomes due and payable; or

(b) any representation or warranty made by any Loan Party (or any of its officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or

(c) any Account Party shall fail to perform or observe any term, covenant or agreement contained in Section 2.10, 5.01(d) (with respect to the Parent), 5.02, 5.03(a) or 5.04; or

(d) any Account Party shall fail to perform or observe any term, covenant or agreement contained in Section 5.01(e) if such failure shall remain unremedied for five Business Days after written notice thereof shall have been given to such Loan Party by any Agent or any Bank; or

(e) any Loan Party shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for (i) in the case of any covenant contained in Section 5.02(g), three Business Days after the earlier of the date on which (A) a Responsible Officer becomes aware of such failure or (B) written notice thereof shall have been given to such Loan Party by any Agent or any Bank, and (ii) in all other cases, 30 days after the earlier of the date on which (A) a Responsible Officer becomes aware of such failure or (B) written notice thereof shall have been given to such Loan Party by any Agent or any Bank; or

(f) the Parent or any of its Subsidiaries shall fail to pay any Material Financial Obligation (but excluding Debt outstanding hereunder) of the Parent or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Material Financial Obligation; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Material Financial Obligation and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such

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event or condition is to accelerate, or to permit the acceleration of, the maturity of such Material Financial Obligation or otherwise to cause, or to permit the holder thereof to cause, such Material Financial Obligation to mature; or any such Material Financial Obligation shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Material Financial Obligation shall be required to be made, in each case prior to the stated maturity thereof; or

(g) any Loan Party or any of its Significant Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Loan Party or any of its Significant Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or any substantial part of its property) shall occur; or any Loan Party or any of its Significant Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this Section 6.01(g); or

(h) any judgment or order for the payment of money in excess of $100,000,000 shall be rendered against any Loan Party or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(i) any non-monetary judgment or order shall be rendered against any Loan Party or any of its Subsidiaries that would be reasonably likely to have a Material Adverse Effect, and there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(j) any provision in Article VII of this Agreement shall for any reason cease to be valid and binding on or enforceable against any Loan Party (other than as a result of a transaction permitted hereunder), or any such Loan Party shall so state in writing; or any Security Document shall for any reason (other than pursuant to the terms thereof) cease to create in favor of the Administrative Agent a valid and perfected first priority Lien on and security interest in the Collateral purported to be covered thereby; or the Administrative Agent shall cease for any reason to hold a perfected first priority Lien on and security interest in the Collateral; or

(k) a Change of Control shall occur; or

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(l) Any Loan Party or any ERISA Affiliate shall incur or shall be reasonably expected to incur liability in excess of $25,000,000 in the aggregate with respect to any Pension Plan or any Multiemployer Plan in connection with the occurrence of any of the following events or existence of any of the following conditions:

(i) Institution of any steps by any Loan Party, any ERISA Affiliate or any other Person, including, without limitation, the PBGC to terminate a Pension Plan if as a result of such termination a Loan Party or any ERISA Affiliate would reasonably expect to be required to make a contribution to such Pension Plan, or would reasonably expect to incur a liability or obligation; or

(ii) A contribution failure occurs with respect to any Pension Plan sufficient to give rise to a lien under section 302(f) of ERISA; or

(iii) Any condition shall exist or event shall occur with respect to a Pension Plan that is reasonably expected to result in any Loan Party or any ERISA Affiliate being required to furnish a bond or security to the PBGC or such Pension Plan, or incurring a liability or obligation; or

(m) any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability or a default, within the meaning of Section 4219(c)(5) of ERISA, has occurred with respect to such Multiemployer Plan which could cause any Loan Party or any ERISA Affiliate to incur a payment obligation in excess of $25,000,000; or

(n) any Custodial Agreement is amended or modified in any manner that is inconsistent with the terms of the Loan Documents or that otherwise could reasonably be expected to have a Material Adverse Effect, or is terminated, or ceases to be in full force and effect or is declared by a court of competent jurisdiction to be null and void, invalid or unenforceable in any material respect, or any party thereto denies that it has any further liability or obligation thereunder; or

(o) any Account Party shall (i) change its name, identity or corporate structure, (ii) change its chief executive office from the location thereof listed on Annex A to the Pledge and Security Agreement, or (iii) change the jurisdiction of its incorporation or organization from the jurisdiction listed on Annex A to the Pledge and Security Agreement (whether by merger or otherwise), unless in each case such Account Party has (1) given twenty (20) days’ prior written notice to the Administrative Agent of its intention to do so, together with information regarding any such new location and such other information in connection with such proposed action as the Administrative Agent may reasonably request, and (2) delivered to the Administrative Agent ten (10) days prior to any such change or removal such documents, instruments and financing statements as may be required by the Administrative Agent, all in form and substance satisfactory to the Administrative Agent, paid all necessary filing and recording fees and taxes, and taken all other actions reasonably requested by the Administrative Agent (including, at the request of the Administrative Agent, delivery of opinions of counsel reasonably satisfactory to the Administrative Agent to the effect that all such actions have been taken), in order to perfect and maintain the Lien upon and security interest in the Collateral provided for in the Pledge and

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Security Agreement in accordance with the provisions of Section 3(c) thereof; provided that an Event of Default under this subsection shall not occur unless any failure of any Account Party to perform or observe any provision of this subsection shall remain unremedied for 30 days after the earlier of the date on which (y) a Responsible Officer becomes aware of such failure or (z) written notice thereof shall have been given to such Loan Party by any Agent or any Bank;

then, and in any such event, the Administrative Agent (i) shall at the request, or may with the consent, of the Required Banks, by notice to the Account Parties, declare the obligation of the Issuing Banks to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate, and/or (ii) shall at the request, or may with the consent, of the Required Banks, by notice to the Account Parties, declare all amounts payable under this Agreement and the other Loan Documents to be forthwith due and payable, whereupon all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Account Parties, and/or (iii) shall at the request, or may with the consent, of the Required Banks, proceed to exercise the rights and remedies of the Administrative Agent and the Banks under the Loan Documents and applicable law, including, without limitation, by dating, delivering and acting upon Letters of Instruction; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to any Account Party under the federal Bankruptcy Code, (x) the obligation of the Issuing Banks to issue Letters of Credit shall automatically be terminated, (y) all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Account Parties and (z) the obligation of the Account Parties to provide cash collateral under Section 6.02 shall automatically become effective.

6.02 Actions in Respect of the Letters of Credit upon Default. If any Event of Default shall have occurred and be continuing, the Administrative Agent may, or shall at the request of the Required Banks, after having taken any of the actions described in Section 6.01(ii) or otherwise, make demand upon the Account Parties to, and forthwith upon such demand the Account Parties will, pay to the Administrative Agent on behalf of the Banks in same day funds at the Administrative Agent’s office designated in such demand, an amount equal to the aggregate Available Amount of all Letters of Credit then outstanding as cash collateral. If at any time during the continuance of an Event of Default the Administrative Agent determines that such funds are subject to any right or claim of any Person other than the Administrative Agent and the Banks or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Account Parties will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional cash collateral, an amount equal to the excess of (a) such aggregate Available Amount over (b) the total amount of funds, if any, that the Administrative Agent determines to be free and clear of any such right and claim. Upon the drawing of any Letter of Credit, such funds shall be applied to reimburse the Issuing Banks or Banks, as applicable, to the extent permitted by applicable law.

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ARTICLE VII

THE GUARANTY

7.01 The Guaranty.

(a) Each Account Party hereby jointly and severally, unconditionally, absolutely and irrevocably guarantees the full and punctual payment (whether at stated maturity, upon acceleration or otherwise) of all Obligations of each of the other Account Parties under the Loan Documents including, without limitation, the principal of and interest on reimbursement obligations owing by such other Account Parties pursuant to this Agreement with respect to Letters of Credit. Upon failure by an Account Party to pay punctually any such amount, each other Account Party agrees to pay forthwith on demand the amount not so paid at the place and in the manner specified in this Agreement.

(b) Each Account Party (other than the Parent), and by its acceptance of this Guaranty, the Administrative Agent and each other Bank, hereby confirms that it is the intention of all such Persons that this Guaranty and the obligations of each Account Party hereunder not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to this Guaranty and the obligations of each Account Party (other than the Parent) hereunder. To effectuate the foregoing intention, the Administrative Agent, the other Banks and the Account Parties hereby irrevocably agree that the obligations of each Account Party (other than the Parent) under this Article VII at any time shall be limited to the maximum amount as will result in the obligations of such Account Party under this Guaranty not constituting a fraudulent transfer or conveyance.

7.02 Guaranty Unconditional. The obligations of each Account Party under this Article VII shall be unconditional, absolute and irrevocable and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by:

(i) any extension, renewal, settlement, compromise, waiver or release (including with respect to any Collateral) in respect of any obligation of any other obligor under any of the Loan Documents, by operation of law or otherwise;

(ii) any modification or amendment of or supplement to any of the Loan Documents;

(iii) any release, non-perfection or invalidity of any direct or indirect security for any obligation of any other obligor under any of the Loan Documents;

(iv) any change in the corporate existence, structure or ownership of any obligor, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting any other obligor or its assets or any resulting release or discharge of any obligation of any other obligor contained in any of the Loan Documents;

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(v) the existence of any claim, set-off or other rights which any obligor may have at any time against any other obligor, the Administrative Agent, any Bank or any other corporation or person, whether in connection with any of the Loan Documents or any unrelated transactions, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim;

(vi) any invalidity or unenforceability relating to or against any other obligor for any reason of any of the Loan Documents, or any provision of applicable law or regulation purporting to prohibit the payment by any other obligor of principal interest or any other amount payable under any of the Loan Documents;

(vii) any law, regulation or order of any jurisdiction, or any other event, affecting any term of any obligation of the Banks’ rights with respect thereto; or

(viii) any other act or omission to act or delay of any kind by any obligor, the Administrative Agent, any Bank or any other corporation or person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of or defense to an Account Party’s obligations under this Article VII.

7.03 Discharge Only upon Payment in Full; Reinstatement in Certain Circumstances. Each Account Party’s obligations under this Article VII shall remain in full force and effect until the commitments of the Banks hereunder shall have terminated, no Letters of Credit shall be outstanding and all amounts payable by the other Account Parties under the Loan Documents shall have been paid in full. If at any time any payment of the principal of or interest on any reimbursement obligation or any other amount payable by an Account Party under the Loan Documents is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of such Account Party or otherwise, each other Account Party’s obligations under this Article VII with respect to such payment shall be reinstated as though such payment had been due but not made at such time.

7.04 Waiver by the Account Parties. Each Account Party irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any corporation or person against any other obligor or any other corporation or person.

7.05 Subrogation. Each Account Party hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against any other Account Party, or any other insider guarantor that arise from the existence, payment, performance or enforcement of such Account Party’s obligations under or in respect of this Guaranty or any other Loan Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Bank against any other Account Party, any other Loan Party or any other insider guarantor or any collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from

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any other Account Party, any other Loan Party or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all amounts payable under this Guaranty shall have been paid in full in cash, no Letters of Credit shall be outstanding and the commitments of the Banks hereunder shall have expired or been terminated. If any amount shall be paid to any Account Party in violation of the immediately preceding sentence at any time prior to the latest of (a) the payment in full in cash of all amounts payable under this Guaranty, and (b) the Expiration Date, such amount shall be received and held in trust for the benefit of the Banks, shall be segregated from other property and funds of such Account Party and shall forthwith be paid or delivered to the Administrative Agent in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to all amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents, or to be held as collateral for any amounts payable under this Guaranty thereafter arising. If (i) any Account Party shall make payment to any Bank of all or any amounts payable under this Guaranty, (ii) all amounts payable under this Guaranty shall have been paid in full in cash, and (iii) the Expiration Date shall have occurred, the Banks will, at such Account Party’s request and expense, execute and deliver to such Account Party appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Account Party of an interest in the obligations resulting from such payment made by such Account Party pursuant to this Guaranty.

7.06 Stay of Acceleration. If acceleration of the time for payment of any amount payable by any Account Party under any of the Loan Documents is stayed upon the insolvency, bankruptcy or reorganization of such Account Party, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by the other Account Parties under this Article VII forthwith on demand by the Administrative Agent made at the request of the requisite proportion of the Banks.

7.07 Continuing Guaranty; Assignments. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the latest of (i) the payment in full in cash of all amounts payable under this Guaranty and (ii) the Expiration Date, (b) be binding upon each Account Party, its successors and assigns and (c) inure to the benefit of and be enforceable by the Banks and their successors, transferees and assigns. Without limiting the generality of clause (c) of the immediately preceding sentence, any Bank may assign or otherwise transfer all or any portion of its rights and obligations under this Agreement (including, without limitation, all or any portion of its Letter of Credit Participating Interest Commitment and the Advances owing to it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Bank herein or otherwise, in each case as and to the extent provided in Section 9.07.

ARTICLE VIII

THE AGENTS

8.01 Authorization and Action. Each Bank (in its capacity as a Bank) hereby appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to such

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Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by the Loan Documents, no Agent shall be required to exercise any discretion or take any action, but shall be required to act (in the case of the Administrative Agent) or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Banks or all the Banks where unanimity is required, and such instructions shall be binding upon all Banks; provided, however, that no Agent shall be required to take any action that exposes such Agent to personal liability or that is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Bank prompt notice of each notice given to it by any Account Party pursuant to the terms of this Agreement.

8.02 Agents’ Reliance, Etc. Neither any Agent nor any of its respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with the Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, each Agent: (a) may consult with legal counsel (including counsel for any Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (b) makes no warranty or representation to any Bank and shall not be responsible to any Bank for any statements, warranties or representations (whether written or oral) made in or in connection with the Loan Documents; (c) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of any Loan Document on the part of any Loan Party or to inspect the property (including the books and records) of any Loan Party; (d) shall not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; and (e) shall incur no liability under or in respect of any Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram or telecopy) reasonably believed by it to be genuine and signed or sent by the proper party or parties.

8.03 Agents and Affiliates. With respect to its LC Commitment Amounts, and the Advances, each Agent shall have the same rights and powers under the Loan Documents as any other Bank and may exercise the same as though it were not an Agent; and the term “Bank” or “Banks” shall, unless otherwise expressly indicated, include each Agent in its individual capacity. Each Agent and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, any Loan Party, any of its Subsidiaries and any Person that may do business with or own securities of any Loan Party or any such Subsidiary, all as if such Agent were not an Agent and without any duty to account therefor to the Banks.

8.04 Bank Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon any Agent or any other Bank and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon any Agent or any other

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Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.

8.05 Indemnification.

(a) Each Bank severally agrees to indemnify each Agent and its officers, directors, employees, agents, advisors and Affiliates (to the extent not promptly reimbursed by the Account Parties) from and against such Bank’s ratable share (determined as provided below) of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against such Agent or any such other Person in any way relating to or arising out of the Loan Documents or any action taken or omitted by such Agent under the Loan Documents; provided, however, that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent’s or other Person’s gross negligence or willful misconduct. Without limitation of the foregoing, each Bank agrees to reimburse each Agent promptly upon demand for its ratable share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Account Parties under Section 9.04, to the extent that such Agent is not promptly reimbursed for such costs and expenses by the Account Parties.

(b) For purposes of this Section 8.05, the Banks’ respective ratable shares of any amount shall be determined, at any time, according to the sum of (i) the aggregate principal amount of the Advances outstanding at such time and owing to the respective Banks, (ii) their respective Pro Rata Shares of the aggregate Available Amounts of all Letters of Credit outstanding at such time and (iii) their respective Unused LC Commitment Amounts at such time. The failure of any Bank to reimburse any Agent promptly upon demand for its ratable share of any amount required to be paid by the Banks to such Agent as provided herein shall not relieve any other Bank of its obligation hereunder to reimburse such Agent for its ratable share of such amount, but no Bank shall be responsible for the failure of any other Bank to reimburse such Agent for such other Bank’s ratable share of such amount. Without prejudice to the survival of any other agreement of any Bank hereunder, the agreement and obligations of each Bank contained in this Section 8.05 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the other Loan Documents.

8.06 Successor Administrative Agent. Any Agent may resign at any time by giving written notice thereof to the Banks and the Parent. Upon any such resignation or removal of the Administrative Agent, the Required Banks shall have the right to appoint a successor Administrative Agent, subject (so long as no Event of Default exists) to the consent of the Parent (which consent shall not be unreasonably withheld). If no successor Administrative Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent’s giving of notice of resignation or the Required Banks’ removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a commercial bank organized under the laws of the United States or of any State thereof and having a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent such successor Administrative Agent shall succeed to and become vested with all the rights, powers,

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discretion, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under the Loan Documents. If within 45 days after written notice is given of the retiring Administrative Agent’s resignation or removal under this Section 8.06 no successor Administrative Agent shall have been appointed and shall have accepted such appointment, then on such 45^th day (i) the retiring Administrative Agent’s resignation or removal shall become effective, (ii) the retiring Administrative Agent shall thereupon be discharged from its duties and obligations under the Loan Documents and (iii) the Required Banks shall thereafter perform all duties of the retiring Administrative Agent under the Loan Documents until such time, if any, as the Required Banks appoint a successor Administrative Agent as provided above. After any retiring Agent’s resignation or removal hereunder as Agent shall have become effective, the provisions of this Article VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If Bank of America ceases to be a Bank hereunder, it shall be deemed to have resigned as Syndication Agent and no replacement shall be appointed.

8.07 Collateral Matters.

(a) The Administrative Agent is authorized on behalf of the Banks, without the necessity of any further notice to or consent from any of the Banks, from time to time to take any action with respect to any Collateral or Security Document that may be necessary or as it may deem to be appropriate to perfect, maintain and protect the security interests in and Liens on the Collateral granted pursuant to the Security Documents.

(b) The Banks irrevocably authorize the Administrative Agent to release any security interest in or Lien on the Collateral held by it pursuant to the Security Documents (i) upon the termination of the Issuing Bank’s obligation to issue Letters of Credit hereunder, the payment in full of the Obligations and the satisfaction and termination in full of all other Letter of Credit Outstandings, (ii) that is sold or disposed of as permitted hereunder or any other Loan Document or to which the requisite number or percentage of Banks have consented or (iii) otherwise pursuant to and in accordance with the provisions of any applicable Loan Document. Upon request by the Administrative Agent at any time, the Banks will confirm in writing the Administrative Agent’s authority to release Collateral pursuant to this Section 8.07(b).

ARTICLE IX

MISCELLANEOUS

9.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Loan Document, nor consent to any departure by any Loan Party therefrom, shall in any event be effective unless the same shall be in writing and signed by Wachovia in its capacity as an Issuing Bank and the Required Banks (and, in the case of an amendment, the Parent), and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall:

(a) unless in writing and signed by all of the Banks (other than any Bank that is, at such time, a Defaulting Bank), do any of the following at any time: (i) waive any of

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the conditions specified in Section 3.01 or, in the case of the Effective Date, Section 3.02, (ii) change the number of Banks or the percentage of (x) the LC Commitment Amounts, (y) the aggregate unpaid principal amount of the Advances or (z) the aggregate Available Amount of outstanding Letters of Credit that, in each case, shall be required for the Banks or any of them to take any action hereunder, (iii) reduce or limit the obligations of any Account Party under Section 7.01 or release such Account Party or otherwise limit such Account Party’s liability with respect to the obligations owing to the Agents and the Banks, (iv) amend this Section 9.01 or any of the definitions herein that would have such effect, (v) extend the Expiration Date, (vi) limit the liability of any Loan Party under any of the Loan Documents, or (vii) release any of the Collateral if such release would cause the aggregate Collateral Value to be less than the Letter of Credit Outstandings;

(b) unless in writing and signed by each affected Bank, do any of the following at any time: (i) increase the LC Commitment Amounts of the Banks or subject the Banks to any additional obligations, (ii) reduce the principal of, or interest on, any reimbursement obligation or any fees or other amounts payable hereunder, or increase any Bank’s LC Commitment Amount, or (iii) postpone any date fixed for any payment of principal of, or interest on, any reimbursement obligation or any fees or other amounts payable hereunder;

provided further that no amendment, waiver or consent shall, unless in writing and signed by an Agent in addition to the Banks required above to take such action, affect the rights or duties of such Agent under this Agreement or the other Loan Documents and no amendment, waiver or consent shall, unless in writing and signed by an Issuing Bank in addition to the Banks above required to take such action, affect the rights or duties of such Issuing Bank under this Agreement or the other Loan Documents.

9.02 Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telegraphic or telecopy communication) and mailed, telegraphed, telecopied or delivered, if to any Account Party, at its address set forth below on the signature pages hereof; if to any Initial Bank, at its Domestic Lending Office specified opposite its name on Part 2 of Schedule I hereto; if to any other Bank, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Bank; if to Wachovia (in its capacity as Issuing Bank) at its address at 401 Linden Street, Mail Code NC-6034, Winston-Salem, North Carolina 27101, Attn: International Operations — Standby Letter of Credit Department, Telecopy No. (336) 735-0952; and if to the Administrative Agent, at its address at Charlotte Plaza Building, 201 South College Street, 8^th Floor NC0680, Charlotte, North Carolina 28288, Attn: Syndication Agency Services, Telecopy No. (704) 383-0288, with a copy to Mark B. Felker, Managing Director, 301 South College Street, 5^th Floor NC0760, Charlotte, NC 28288, Telecopy No. (704) 383-7611; or, as to any party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall, when mailed, telegraphed or telecopied, be effective when deposited in the mails, delivered to the telegraph company or transmitted by telecopier, respectively, except that notices and communications to the Administrative Agent pursuant to Article II, III or VIII shall not be effective until received by the Administrative Agent. Manual delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or of

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any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of an original executed counterpart thereof.

9.03 No Waiver; Remedies. No failure on the part of any Bank or any Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

9.04 Costs and Expenses.

(a) Each of the Account Parties agrees to pay on demand (i) all reasonable costs and expenses of the Agents, the Joint Lead Arrangers and Wachovia, in its capacity as an Issuing Bank, in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Documents (including, without limitation, (A) all due diligence, collateral review, syndication, transportation, computer, duplication, appraisal, audit, insurance, consultant, search, filing and recording fees and expenses and (B) the reasonable fees and expenses of a single counsel for the Administrative Agent and Wachovia in its capacity as an Issuing Bank with respect thereto, with respect to advising the Administrative Agent as to its rights and responsibilities, or the perfection, protection or preservation of rights or interests, under the Loan Documents, with respect to negotiations with any Loan Party or with other creditors of any Loan Party or any of its Subsidiaries arising out of any Default or any events or circumstances that may give rise to a Default and with respect to presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding involving creditors’ rights generally and any proceeding ancillary thereto); and (ii) all reasonable costs and expenses of each Agent, each Issuing Bank and each Bank in connection with the enforcement of the Loan Documents (including, without limitation, in connection with the sale of, collection from, or other realization upon, the Collateral), whether in any action, suit or litigation, or any bankruptcy, insolvency or other similar proceeding affecting creditors’ rights generally (including, without limitation, the reasonable fees and expenses of counsel for the Administrative Agent, each Issuing Bank and each Bank with respect thereto).

(b) Each of the Account Parties jointly and severally agrees to indemnify and hold harmless each Agent, each Joint Lead Arranger, each Issuing Bank, each Bank and each of their Affiliates and their respective officers, directors, employees, agents and advisors (each, an “Indemnified Party”) from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) this Agreement, the actual or proposed use of the proceeds of the Advances, the Loan Documents or any of the transactions contemplated thereby, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnified Party or any of its Affiliates. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 9.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors,

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shareholders or creditors or an Indemnified Party or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated by the Loan Documents are consummated. Each of the Account Parties also agrees not to assert any claim against any Agent, any Joint Lead Arranger, any Bank or any of their Affiliates, or any of their respective officers, directors, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the credit facilities provided hereunder, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Loan Documents or any of the transactions contemplated by the Loan Documents.

(c) Without prejudice to the survival of any other agreement of any Loan Party hereunder or under any other Loan Document, the agreements and obligations of the Account Parties contained in Section 2.07 and this Section 9.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under any of the other Loan Documents.

9.05 Right of Set-off. Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Administrative Agent to declare amounts owing hereunder to be due and payable pursuant to the provisions of Section 6.01, each Agent and each Bank and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and otherwise apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Agent, such Bank or such Affiliate to or for the credit or the account of any Account Party against any and all of the Obligations of such Account Party now or hereafter existing under the Loan Documents, irrespective of whether such Agent or such Bank shall have made any demand under this Agreement and although such Obligations may be unmatured. Each Agent and each Bank agrees promptly to notify each Account Party after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Agent and each Bank and their respective Affiliates under this Section 9.05 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Agent, such Bank and their respective Affiliates may have.

9.06 Binding Effect. This Agreement shall become effective when it shall have been executed by each Account Party, each Issuing Bank and each Agent and the Administrative Agent shall have been notified by each Initial Bank that such Initial Bank has executed it and thereafter shall be binding upon and inure to the benefit of each Account Party, each Agent, each Issuing Bank and each Bank and their respective successors and assigns, except that no Account Party shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Banks.

9.07 Assignments and Participations.

(a) Each Bank may, and so long as no Default shall have occurred and be continuing, if demanded by any Account Party (following a demand by such Bank pursuant to Section 2.12) upon at least five Business Days notice to such Bank and the Administrative Agent, will, assign

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to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its LC Commitment Amount, its Letter of Credit Participating Interest Commitment and the Letter of Credit Advances owing to it); provided, however, that (i) each such assignment shall be of a uniform, and not a varying, percentage of all rights and obligations of such Bank hereunder, except for any non-pro rata assignment made by a Downgraded Bank after a request by the Administrative Agent pursuant to Section 2.14 (and any subsequent non-pro rata assignment of the interest so assigned or by the Downgraded Bank) and any other non-pro rata assignment approved by the Administrative Agent and any Account Party, (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was (x) a Bank or an Affiliate of any Bank, the aggregate amount of the LC Commitment Amounts being assigned to such Eligible Assignee pursuant to such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $1,000,000 unless it is an assignment of the entire amount of such assignor’s LC Commitment Amount, or (y) not a Bank or an Affiliate of any Bank, the aggregate amount of the LC Commitment Amounts being assigned to such Eligible Assignee pursuant to such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $5,000,000 unless it is an assignment of the entire amount of such assignor’s LC Commitment Amount, (iii) each such assignment shall be to an Eligible Assignee, (iv) each assignment made as a result of a demand by any Account Party pursuant to Section 2.12 shall be arranged by such Account Party after consultation with the Administrative Agent and shall be either an assignment of all of the rights and obligations of the assigning Bank under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Bank under this Agreement, (v) no Bank shall be obligated to make any such assignment as a result of a demand by any Account Party pursuant to Section 2.12 unless and until such Bank shall have received one or more payments from either such Account Party or other Eligible Assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances made by such Bank, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Bank under this Agreement, (vi) as a result of such assignment, no Account Party shall be subject to additional amounts under Section 2.06 or 2.08 and (vii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with a processing and recordation fee of $3,500.

(b) Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance, (i) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Bank, hereunder and (ii) the Bank assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (other than its rights under Sections 2.06, 2.08 and 9.04 to the extent any claim thereunder relates to an event arising prior to such assignment and any other rights that are expressly provided hereunder to survive) and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the remaining portion of an assigning Bank’s rights and obligations under this Agreement, such Bank shall cease to be a party hereto).

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(c) By executing and delivering an Assignment and Acceptance, each Bank assignor thereunder and each assignee thereunder confirm to and agree with each other and the other parties thereto and hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Bank makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; (ii) such assigning Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its obligations under any Loan Document or any other instrument or document furnished pursuant thereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon any Agent, such assigning Bank or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated to such Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Bank.

(d) The Administrative Agent, acting for this purpose (but only for this purpose) as the agent of the Account Parties, shall maintain at its address referred to in Section 9.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Banks and the LC Commitment Amount of, and principal amount of the Advances owing to, each Bank from time to time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Account Parties, the Agents and the Banks shall treat each Person whose name is recorded in the Register as a Bank hereunder for all purposes of this Agreement. The Register shall be available for inspection by any Account Party or any Agent or any Bank at any reasonable time and from time to time upon reasonable prior notice.

(e) Upon its receipt of an Assignment and Acceptance executed by an assigning Bank and an assignee, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit A hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Parent and to the parties to such Assignment and Acceptance.

(f) Each Bank may sell participations to one or more Persons (other than any Loan Party or any of its Affiliates) in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its LC Commitment Amount, its Letter of Credit Participating Interest Commitment and the Advances owing to it; provided,

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however, that (i) such Bank’s obligations under this Agreement (including, without limitation, its Letter of Credit Participating Interest Commitment) shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Account Parties, the Agents and the other Banks shall continue to deal solely and directly with such Bank in connection with such Bank’s rights and obligations under this Agreement and (iv) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, reimbursement obligations or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, postpone any date fixed for any payment of principal of, or interest on, the reimbursement obligations or any fees or other amounts payable hereunder, in each case to the extent subject to such participation. Each Bank shall, as agent of the Account Parties solely for the purposes of this Section 9.07, record in book entries maintained by such Bank, the name and amount of the participating interest of each Person entitled to receive payments in respect of any participating interests sold pursuant to this Section 9.07.

(g) Any Bank may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.07, disclose to the assignee or participant or proposed assignee or participant any information relating to any Account Party furnished to such Bank by or on behalf of any Account Party; provided, however, that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any Confidential Information received by it from such Bank.

(h) Notwithstanding any other provision set forth in this Agreement, any Bank may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System.

9.08 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of an original executed counterpart of this Agreement.

9.09 No Liability of the Issuing Banks. Each Account Party assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither an Issuing Bank nor any of its officers, directors, employees or agents shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by such Issuing Bank against presentation of documents that do not strictly comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that such Account Party shall have a claim

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against such Issuing Bank, and such Issuing Bank shall be liable to such Account Party, to the extent of any direct, but not consequential, damages suffered by such Account Party that such Account Party proves were caused by (i) such Issuing Bank’s willful misconduct or gross negligence as determined in a final, non-appealable judgment by a court of competent jurisdiction in determining whether documents presented under any Letter of Credit comply with the terms of the Letter of Credit or (ii) such Issuing Bank’s willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit. In furtherance and not in limitation of the foregoing, the Issuing Banks may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary.

9.10 Confidentiality. Neither any Agent nor any Bank shall disclose any Confidential Information to any Person without the consent of the Parent, other than (a) to such Agent’s or such Bank’s Affiliates and their officers, directors, employees, agents and advisors and to actual or prospective Eligible Assignees and participants, and then only on a confidential basis, (b) as required by any law, rule or regulation or judicial process, (c) as requested or required by any state, federal or foreign authority or examiner regulating such Bank or pursuant to any request of any self-regulatory body having or claiming authority to regulate or oversee any aspect of a Bank’s business of that of any of its Affiliates and (d) to any rating agency when required by it, provided that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Confidential Information relating to the Loan Parties received by it from such Bank. Notwithstanding anything herein to the contrary, the information subject to this Section 9.10 shall not include, and the Administrative Agent and each Bank may disclose to any and all Persons, without limitation of any kind, any information with respect to the “tax treatment” and “tax structure” (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby or by any of the other Loan Documents and all materials of any kind (including opinions or other tax analyses) that are provided to the Administrative Agent or such Bank relating to such tax treatment and tax structure (it being understood that this authorization is retroactively effective to the commencement of the first discussions between or among any of the parties regarding the transactions contemplated hereby or by any of the other Loan Documents); provided that with respect to any document or similar item that in either case contains information concerning such tax treatment or tax structure as well as other information, this sentence shall only apply to such portions of the document or similar item that relate to such tax treatment or tax structure.

9.11 Jurisdiction, Etc.

(a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be

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enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or any of the other Loan Documents in the courts of any jurisdiction.

(b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(c) Each of the Account Parties hereby irrevocably appoints Mayer, Brown, Rowe & Maw LLP, with offices on the Effective Date at 1675 Broadway, New York, New York, 10019, USA as its agent to receive, accept and acknowledge for and on its behalf services of any and all legal process, summons, notices and documents which may be served in any such action or proceeding. If for any reason such agent shall cease to be available to act as such, the Account Parties agree to promptly designate a new agent satisfactory to the Administrative Agent in the Borough of Manhattan, The City of New York, to receive, accept and acknowledge for and on its behalf service of any and all legal process, summons, notices and documents which may be served in any such action or proceeding pursuant to the terms of this Section 9.11. In the event that any Borrower shall fail to designate such new agent, service of process in any such action or proceeding may be made on such Account Party by the mailing of copies thereof by express or overnight mail or courier, postage prepaid, to such Account Party at its address set forth opposite its signature below.

9.12 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

9.13 Waiver of Jury Trial. Each of the Account Parties, the Agents and the Banks irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to any of the Loan Documents, the Advances or the actions of any Agent or any Bank in the negotiation, administration, performance or enforcement thereof.

9.14 Disclosure of Information. Each Account Party agrees and consents to the Administrative Agent’s disclosure of information relating to this transaction to Gold Sheets and other similar bank trade publications. Such information will consist of deal terms and other information customarily found in such publications. The Parent shall have the right to review and approve any such disclosure made by the Administrative Agent before such disclosure is made (such approval not to be unreasonably withheld).

9.15 USA Patriot Act. Each Bank hereby notified the Account Parties that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies each Account Party, which information includes the name and address of such Account

71

Party and other information that will allow such Bank to identify such Account Party in accordance with the Patriot Act. Each Account Party shall provide such information promptly upon request from such Bank.

9.16 Certain Effective Date Matters. By their execution of this Agreement, (i) the Account Parties and the Banks that are parties to the Existing Reimbursement Agreement (which Banks constitute “Required Banks” under and as defined in the Existing Reimbursement Agreement) agree that the Existing Reimbursement Agreement shall terminate and be of no further force or effect on the Effective Date (except that any provision of any Existing Reimbursement Agreement that by its terms survives termination of such Existing Reimbursement Agreement shall remain in full force and effect), and (ii) the relevant Account Parties and the Issuing Banks agree that each Existing Letter of Credit shall become a Letter of Credit hereunder on the Effective Date, in each case without any further action by any Person.

[Remainder of page intentionally left blank]

72

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

ACE LIMITED

The Common Seal of ACE Limited was hereunto affixed in the presence of:

Authorized Officer

Authorized Officer

ACE BERMUDA INSURANCE LTD.

The Common Seal of ACE Bermuda Insurance Ltd. was hereunto affixed in the presence of:

Authorized Officer

Authorized Officer

ACE TEMPEST LIFE REINSURANCE LTD.

The Common Seal of ACE Tempest Life Reinsurance Ltd. was hereunto affixed in the presence of:

Authorized Officer

Authorized Officer

Signature Page to Secured Reimbursement Agreement

ACE TEMPEST REINSURANCE LTD.

The Common Seal of ACE Tempest Reinsurance Ltd. was hereunto affixed in the presence of:

Authorized Officer

Authorized Officer

Address for each Account Party:

ACE Global Headquarters

17 Woodbourne Avenue

Hamilton HM08 Bermuda

Telecopy: (441) 296-0087

Signature Page to Secured Reimbursement Agreement

WACHOVIA BANK, NATIONAL ASSOCIATION, as Administrative Agent, as Issuing Bank and as an Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

BANK OF AMERICA, N.A., as Syndication Agent and as an Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

BARCLAYS BANK, PLC, as a Co-Documentation Agent, as an Issuing Bank and as an Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

CITIBANK, N.A., as a Co-Documentation Agent,

as an Issuing Bank and as an Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

JPMORGAN CHASE BANK, as a

Co-Documentation Agent and as an Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

DEUTSCHE BANK AG, NEW YORK BRANCH, as an Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

HSBC BANK USA, NATIONAL ASSOCIATION as an Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

ING BANK N.V., LONDON BRANCH, as an

Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

THE ROYAL BANK OF SCOTLAND PLC, as an Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

ABN AMRO BANK, N.V., as an Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

KEYBANK NATIONAL ASSOCIATION, as an Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

STATE STREET BANK AND TRUST COMPANY, as an Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

BNP PARIBAS, as an Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

THE BANK OF TOKYO-MITSUBISHI, LTD. NEW YORK BRANCH, as an Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

COMERICA BANK, as an Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

LLOYDS TSB BANK PLC, as an Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

MELLON BANK, N.A., as an Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

NATIONAL AUSTRALIA BANK LIMITED, as an Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

NATIONAL CITY BANK, as an Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

WELLS FARGO BANK, NATIONAL ASSOCIATION, as an Initial Bank

By:

Title: 

By:

Title: 

Signature Page to Secured Reimbursement Agreement

THE BANK OF N.T. BUTTERFIELD & SON LIMITED, as an Initial Bank

By:

Title: 

Signature Page to Secured Reimbursement Agreement

SCHEDULE I

LC COMMITMENT AMOUNTS

Wachovia Bank, National Association	$	37,100,000
Bank of America, N.A.	$	37,100,000
Barclays Bank PLC	$	35,200,000
CitiBank, N.A.	$	35,200,000
JPMorgan Chase Bank	$	35,200,000
Deutsche Bank AG, New York Branch	$	29,600,000
HSBC Bank USA, National Association	$	29,600,000
ING Bank N.V., London Branch	$	29,600,000
The Royal Bank of Scotland plc	$	29,600,000
ABN AMRO Bank, N.V.	$	24,100,000
KeyBank National Association	$	24,100,000
State Street Bank and Trust Company	$	24,100,000
BNP Paribas	$	14,800,000
The Bank of Tokyo-Mitsubishi, Ltd. New York Branch	$	14,800,000
Comerica Bank	$	14,800,000
Lloyds TSB Bank plc	$	14,800,000
Mellon Bank, N.A.	$	14,800,000
National Australia Bank Limited	$	14,800,000
National City Bank	$	14,800,000
Wells Fargo Bank, National Association	$	14,800,000
The Bank of N.T. Butterfield & Son Limited	$	11,100,000
Total	$	500,000,000

1

SCHEDULE I – PART 2

DOMESTIC LENDING OFFICES

Wachovia Bank, National Association	Agency Management Group 301 South College Street, 5th Floor Charlotte, North Carolina 28288-0737 Attn: Mark Felker Telephone: (704) 374-7074 Telecopy: (704) 383-7611
Bank of America, N.A.	231 S. LaSalle Street Chicago, Illinois 60697 Attn: Debra Basler Telephone: (312) 828-3734 Telecopy: (312) 987-0889
Barclays Bank PLC	P.O. Box 544 1st Floor 54 Lombard Street London EC3V 9EX England Attn: Neil Holmes Telephone: 44 (0) 20 7699 3125 Telecopy: 44 (0) 20 7699 2407 Copies to: Barclays Capital GSU, 5 North Colonade Canary Wharf London E14 4BB England Attn: Graham Smart Telephone: 44 (0) 20 7773 6450 Telecopy: 44 (0) 20 7773 6807
CitiBank, N.A.
JPMorgan Chase Bank	Financial Institutions Group 270 Park Avenue, 15th Floor New York, New York 10017 Attn: Helen Newcomb Telephone: (212) 270-6260 Telecopy: (212) 270-1511
Deutsche Bank AG, New York Branch	31 West 52nd Street Mail Stop NYC01-2402 New York, New York 10019 Attn: Clinton M. Johnson Telephone: (212) 469-8101 Telecopy: (212) 469-8366

2

HSBC Bank USA, National Association	452 Fifth Avenue, 5th Floor New York, New York 10018 Attn: Kenneth J. Johnson Telephone: (212) 525-2480 Telecopy: (212) 525-2479
ING Bank N.V., London Branch
The Royal Bank of Scotland plc
ABN AMRO Bank, N.V.	540 West Madison Street, Suite 2621 Chicago, Illinois 60661 Attn: Credit Administration Telecopy: (312) 992-5111 Copies to: 350 Park Avenue New York, NY 10055 Telecopy: (212) 409-1718
KeyBank National Association	127 Public Square, 6th Floor Cleveland, Ohio 44114 Attn: Mary K. Young Telephone: (216) 689-4443 Telecopy: (216) 689-4981
State Street Bank and Trust Company	Domestic Lending Office: 225 Franklin Street Boston, Massachusetts 02110 Address for notices: Lafayette Corporate Center 2 Avenue de Lafayette Boston, Massachusetts 02111 Attn: Edward M. Anderson, VP Telephone: (617) 662-3782 Telecopy: (617) 662-3778
BNP Paribas	787 7th Avenue, 28th Floor New York, New York 10019 Attn: Joshua Landau Telephone: (212) 841-3823 Telecopy: (212) 841-2533
The Bank of Tokyo-Mitsubishi, Ltd. New York Branch
Comerica Bank	500 Woodward Avenue Detroit, Michigan 48226-3331 Attn: Martin G. Ellis Telephone: (313) 222-9443 Telecopy: (313) 222-5466

3

Lloyds TSB Bank plc	1251 Avenue of the Americas, 39th Floor NY, NY 10020 Attn: Patricia Kilian, VP, Loans Administration Telephone: (212) 930-8914 Telecopy: (212) 930-5098
Mellon Bank, N.A.	One Mellon Center, Room 4505 Pittsburgh, Pennsylvania 15258-0001 Attn: Karla Maloof Telephone: (412) 236-4147 Telecopy: (412) 234-8087
National Australia Bank Limited	245 Park Avenue, 28th Floor New York, NY 10167 Attn: Mike McHugh Telephone: (212) 916-9559 Telecopy: (212) 949-9515
National City Bank	1 North Franklin, Suite 3600 Chicago, IL 60606 Attn: Gustavus Bahr Telephone: (312) 384- 6904 Telecopy: (312) 384- 4618
Wells Fargo Bank, National Association	90 So. 7th Street MAC N9305-075, 7th Floor Minneapolis, Minnesota 55402 Attn: Jason Paulnock Telephone: (612) 667-4742 Telecopy: (612) 667-7251
The Bank of N.T. Butterfield & Son Limited	65 Front Street Hamilton HM DX, Bermuda Attn: Jonathan Raynor, VP-Corporate Banking Telephone: (441) 298-4774 Telecopy: (441) 296-2851

4

SCHEDULE II

EXISTING LETTERS OF CREDIT

1. Wachovia Letter of Credit No. SM207101

Beneficiary: Accette Insurance Management

Amount: US $5,646,486.25

2. Wachovia Letter of Credit No. SM200323

Beneficiary: Pacific Employers Insurance

Amount: US $3,050,235.00

3. Wachovia Letter of Credit No. SM419401

Beneficiary: UNUM Life Insurance Company of America

Amount: US $148,607,168.00

4. Wachovia Letter of Credit No. SM201865

Beneficiary: Liberty Re (Bermuda) Limited

Amount: US $38,600,000.00

5. Wachovia Letter of Credit No. SM206405

Beneficiary: Houston Casualty Company

Amount: US $1,500,000

5

SCHEDULE III

METHODOLOGY FOR CALCULATION OF COLLATERAL VALUES

In order to be included in the calculation of aggregate Collateral Value (in addition to other requirements set forth in the Reimbursement Agreement and this Schedule), investments shall satisfy each of the criteria (including as to rating) under one of the categories listed below. In addition, the following conditions shall apply:

1. No portion of the Collateral (other than U.S. Government Securities) consisting of securities of a single issuer shall exceed 10% of the Collateral Value at any time.

2. No security shall be included in the calculation of aggregate Collateral Value unless it is listed on a national securities exchange or freely tradeable at readily established prices in over-the-counter transactions.

3. For purposes of this Schedule and each Collateral Value Report, all maturities are calculated from the relevant date of determination of the Collateral Value.

4. For purposes of calculating the average rating of the Collateral included in the calculation of the aggregate Collateral Value, (a) Moody’s ratings shall be converted to their respective S&P equivalents in accordance with established practice, and (b) commercial paper rated “A2” shall be deemed to be rated “A.”

Category of Investment/Security	Eligible Percentage
Cash (denominated in U.S. Dollars)	100%
Prime bank certificates of deposit issued by U.S. banks rated Aa3/AA - or better	95%
U.S. Government Securities Maturity 2 years or less Maturity over 2 years	95% of Market 90% of Market
Investment-grade municipal bonds (Rating Aaa/AAA – Baa3/BBB-) Maturity 5 years or less Maturity over 5 years	85% of Market 80% of Market
Investment-grade corporate bonds (Rating Aa3/AA - or better, non-convertible, NYSE-traded) Maturity 2 years or less Maturity over 2 years	90% of Market 85% of Market
Investment-grade corporate bonds (Rating A1/A+ to Baa3/BBB-, non-convertible, NYSE-traded) Maturity 2 years or less Maturity over 2 years	85% of Market 80% of Market
Commercial paper (Rating A1-A2, P1-P2)	85% of Market

6

SCHEDULE 4.01(B)

SUBSIDIARIES

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
ACE Limited	Cayman Islands	Publicly held	Bermuda, holding company
ACE Bermuda Insurance Ltd.	Bermuda	100%	Bermuda, insurance, reinsurance, general and long term; Mexico, reinsurance
ACE PCC Insurance Limited	Guernsey	100%	Guernsey, protected cell rent-a-captive business
Paget Reinsurance International Ltd.	Bermuda	100%	Bermuda, insurance/reinsurance
ACE Capital Title Reinsurance Company (EI# 06-1434264, NAIC# 50028, NY)	New York	100%	CA, MI, NY, TX, title insurance/reinsurance
Oasis Investments Limited	Bermuda	67%	Bermuda, Investment Holding
Oasis Investments 2 Ltd.	Bermuda	67%	Bermuda, holding company
ACE Financial Solutions International, Ltd.	Bermuda	100%	Bermuda, insurance management
ACE European Markets Reinsurance Limited	Ireland	100%	Ireland, general and life reinsurance
ACE European Markets Insurance Limited	Ireland	100%	EEA/Europe, direct non-life insurance, UK branch
Corporate Officers & Directors Assurance Ltd.	Bermuda	100%	Bermuda, insurance
Oasis Real Estate Company Ltd.	Bermuda	100%	Bermuda, investment holding
Scarborough Property Holdings Ltd.	Bermuda	40%	Bermuda, investment holding
Sovereign Risk Insurance Limited	Bermuda	50%	Bermuda, insurance agent
Tripar Partnership	Bermuda	98% 2% (CODA)	Bermuda, investment holding
ACE Realty Holdings Limited	Bermuda	100%	Bermuda, investment holding
Oasis Personnel Limited	Cayman Islands	100%	Cayman Islands, general services
Shipowners Insurance and Guaranty Co. Limited	Bermuda	10% Series A 8% Series B	Bermuda, insurance
Intrepid Re Holdings Limited	Bermuda	38.5%	Bermuda, holding

1

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
Intrepid Re Limited	Bermuda	100%	Bermuda, Reinsurance
Freisenbruch-Meyer Insurance Ltd.	Bermuda	40%	Bermuda, local and commercial insurance
Freisenbruch-Meyer Insurance Services Ltd.	Bermuda	40%	Bermuda, local and commercial insurance
Assured Guaranty Ltd. (formerly AGC Holdings Limited)	Bermuda	35% (remaining 65% is publicly held)	Bermuda, holding company
Assured Guaranty Re International Ltd. (formerly ACE Capital Re International Ltd.)	Bermuda	100%	Bermuda, insurance/reinsurance, general and long term
Assured Guaranty Barbados Holdings Ltd. (formerly ACE KRE Holdings Limited)	Barbados	100%	Barbados, investment holding
Assured Guaranty Overseas US Holdings Inc. (formerly ACE Capital Re USA Holdings Incorporated)	Delaware	100%	Delaware, investment holding
Assured Guaranty Re Overseas Ltd. (formerly ACE Capital Re Overseas Ltd.)	Bermuda	100%	Bermuda, insurance/reinsurance, general and long term
Assured Guaranty Mortgage Insurance Company (formerly ACE Capital Mortgage Reinsurance Co.) (EI# 06-1384770, NAIC# 10021, NY)	New York	100%	New York, DC, mtg. guaranty insurance/reinsurance
AG Intermediary Inc. (formerly ACE Capital Re Inc.)	New York	100%	New York, reinsurance intermediary
Assured Guaranty Finance Overseas Ltd. (formerly ACE Finance Overseas Limited)	United Kingdom	100%
Assured Guaranty US Holdings Inc.	Delaware	100%	Delaware, holding company
AG Financial Products Inc. (formerly AGR Financial Products Inc.)	USA (Delaware)	100%	Delaware, financial products
Assured Guaranty Corp. (formerly ACE Guaranty Corp.) (EI#52 - 1533088, NAIC #30180, MD)	Maryland	100%	US, insurance company
Assured Guaranty (UK) Ltd. (formerly ACE Guaranty (UK) Ltd.)	United Kingdom	100%	UK, applying for license to be financial guaranty insurer
ACE Risk Assurance Company (EI# 13-4027591, NAIC #10943, MD)	Maryland	100%	Maryland, reinsurance
ACE Global Markets Limited	United Kingdom	100%	UK, investment holding

2

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
ACE Group Holdings Limited	United Kingdom	100%	UK, investment holding
ACE Tarquin	United Kingdom	100%	UK, investment holding
ACE Capital V Limited	United Kingdom	100%	UK, Lloyd’s corporate member; capital provider
ACE Leadenhall Limited	United Kingdom	100%	UK, investment holding
ACE Underwriting Agencies Limited	United Kingdom	100%	UK, Lloyd’s managing agency
ACE Trustees Limited	United Kingdom	100%	UK, investment holding
ACE London Group Limited	United Kingdom	100%	UK, investment holding
ACE Capital Limited	United Kingdom	100%	UK, Lloyd’s corporate member
ACE Capital III Limited	United Kingdom	100%	UK, Lloyd’s corporate member
ACE Capital IV Limited	United Kingdom	100%	UK, Lloyd’s corporate member; capital provider
ACE London Holdings Limited	United Kingdom	100%	UK, investment holding
ACE Capital II Limited	United Kingdom	100%	UK, Lloyd’s corporate member
ACE London Investments Limited	United Kingdom	100%	UK, investment holding
ACE London Aviation Limited	United Kingdom	100%	UK, Lloyd’s managing agent
ACE London Underwriting Limited	United Kingdom	100%	UK, Lloyd’s managing agent
ACE Underwriting Services Limited	United Kingdom	100%	UK, Lloyd’s service company
AGM Underwriting Limited	United Kingdom	100%	UK, dormant
ACE London Services Limited	United Kingdom	100%	UK, service company
ACE Capital VI Limited	United Kingdom	100%	UK, Lloyd’s corporate member
ACE UK Limited	United Kingdom	77%	UK, investment holding
ACE UK Holdings Limited	United Kingdom	100%	UK, investment holding
ACE (MI) Limited	United Kingdom	100%	UK, dormant
ACE (MS) Limited	United Kingdom	100%	UK, dormant
ACE UK Underwriting Limited	United Kingdom	100%	Lloyd’s managing agent
ACE (PM) Limited	United Kingdom	100%	UK, investment holding
ACE UK Limited	United Kingdom	23%	UK, investment holding
ACE Services Limited	Cayman Islands	100%	Cayman Islands, general services

3

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
ACE Holdings (Gibraltar) Limited	Gibraltar	100%	Gilbraltar, Bermuda permit, investment holding
ACE Gibraltar Limited	Gibraltar	51%	Gilbraltar, insurance intermediary
ACE-ii Limited	United Kingdom	100%	dormant, to become internet company
ACE-ii (Gibraltar) Limited	Gibraltar	100%	dormant,
ACE Underwriting Services (Gibraltar) Limited	Gibraltar	100%	dormant,
Arles Services Limited	Gibraltar	100%	dormant,
CGA Group Limited	Bermuda	18.20%	Bermuda investment holding
CGA Investment Management, Inc.	USA (Delaware)	100%	USA, investment
Commercial Guaranty Assurance Ltd.	Bermuda	100%	Bermuda, insurance
Oasis Insurance Services Ltd.	Bermuda	100%	Bermuda, general services
ACE Tempest Life Reinsurance Ltd.	Bermuda	100%	Bermuda, insurance, reinsurance, general and long term (life, health, annuities)
ACE Tempest Reinsurance Ltd.	Bermuda	100%	Bermuda, insurance/reinsurance, long term; Puerto Rico, reinsurance
Oasis Investments Limited	Bermuda	33%	Bermuda, investment holding
Oasis Investments 2 Ltd.	Bermuda	33%	Bermuda, holding company
St. George Holdings Ltd	Cayman Islands	10.71%	Cayman Islands, investment holding
St. George Investments Ltd.	Cayman Islands	100%	Cayman Islands, investment holding
ACE INA Holdings Inc.	USA (Delaware)	20%	USA, investment holding
ACE Prime Holdings Inc.	USA (Delaware)	100%	USA, investment holding
ACE INA Holdings Inc.	USA (Delaware)	80%	USA, investment holding
ACE Seguros S.A.	Argentina	99.35%	Argentina, Insurance

4

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
Huatai Insurance Company of China, Limited	China	6.129% 10% (ACE Tempest Reinsurance Ltd.) 6% (ACE US Holdings, Inc.)	China, property and casualty insurer
ACE Seguradora S.A.	Brazil	99.9% 0.1% (ACE Prime Holdings Inc.)	Brazil, insurance
Servicios ACE INA S.A. de C.V.	Mexico	99.99% .00002% (ACE Prime Holdings Inc.)	Mexico, service company
ACE Tempest Re USA, Inc.	USA (Connecticut)	100%	CT, NJ, NY, OH, PA, SC, TX, reinsurance intermediary manager
INA Corporation	USA (Pennsylvania)	100%	USA, investment holding company
ACE INA Properties, Inc.	USA (Delaware)	100%	USA, holding company
Conference Facilities, Inc.	USA (Pennsylvania)	100%	USA, owns & operates corporate facilities
INA Tax Benefits Reporting, Inc.	USA (Delaware)	100%	USA, tax info & 3rd party reporting
INA Financial Corporation	USA (Delaware)	100%	USA, investment holding
Brandywine Holdings Corporation	USA (Delaware)	100%	USA, holding company
Brandywine Run-Off Services, Inc.	USA (Delaware)	100%	USA, management company for 1792
Assurex Development Corporation	USA (Ohio)	11.011%	USA, provides loans to insurance agents
Cravens, Dargan & Company, Pacific Coast	USA (Delaware)	100%	USA, managing general agency

5

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
Cravens, Dargan & Company, Pacific Coast of Illinois, Inc.	USA (Illinois)	100%	USA, managing general agency
Century Indemnity Company (EI# 05-6105395, NAIC #20710, PA)	USA (Pennsylvania)	100%	USA, insurance
Century Reinsurance Company (EI# 06-0988117, NAIC #35130, PA)	USA (Pennsylvania)	100%	USA, reinsurance
ACE American Reinsurance Company (EI# 23-1740414, NAIC#22705, PA)	USA (Pennsylvania)	100%	USA, reinsurance
Brandywine Reinsurance Company S.A.-N.V.	Belgium	100%	Belgium, reinsurance
The 1792 Company	USA (Delaware)	100%	USA, (former underwriting member of New York Insurance Exchange)
Century International Reinsurance Company Ltd.	Bermuda	100%	Bermuda, insurance & reinsurance
INA Holdings Corporation	USA (Delaware)	100%	USA, holding company
INATrust, fsb	Chartered by Office of Thrift Supervision	100%	USA, savings bank
INA Reinsurance Company, Ltd.	Bermuda	100%	Bermuda, reinsurance
ACE INA Financial Institution Solutions, Inc.	USA (Delaware)	100%	USA, floodplain determination & other services to financial institutions
American Lenders Facilities, Inc.	USA (California)	100%	USA, collection & loan servicing for third parties
ESIS, Inc.	USA (Pennsylvania)	100%	USA, markets risk management Programs
NewMarkets Insurance Agency, Inc.	USA (Delaware)	100%	USA, managing general agency
ACE INA Excess and Surplus Insurance Services, Inc.	USA (Georgia)	100%	USA, excess & surplus lines broker
ACE INA Excess and Surplus Insurance Services, Inc.	USA (Pennsylvania)	100%	USA, excess & surplus lines broker

6

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
ACE INA Excess and Surplus Insurance Services, Inc.	USA (California)	100%	USA, excess & surplus lines broker
ACE INA Excess and Surplus Insurance Services, Inc.	USA (Illinois)	100%	USA, excess & surplus lines broker
Excess and Surplus Insurance Services, Inc.	USA (Texas)	100%	USA, managing general agency
ACE Financial Solutions, Inc.	USA (Delaware)	100%	USA, premium finance company
Oasis US Inc.	USA (Delaware)	100%	USA, general services
ACE Risk Solutions, Inc.	USA (NewYork)	100%	USA, reinsurance intermediary
Indemnity Insurance Company of North America (EI# 06-1016108, NAIC #43575, PA)	USA (Pennsylvania)	100%	USA, Puerto Rico, USVI, insurance
ACE Indemnity Insurance Company EI#92-0040526, NAIC #10030, PA)	USA (Pennsylvania)	100%	USA, insurance
Allied Insurance Company (EI# 23-2021364, NAIC #36528, CA)	USA (California)	100%	USA, insurance
ACE American Insurance Company (EI#95-2371728, NAIC# 22667, PA)	USA (Pennsylvania)	100%	USA, Korea, Puerto Rico USVI, Guam, Bermuda permit, Taiwan (life), insurance
Pacific Employers Insurance Company (EI#95-1077060, NAIC# 22748, PA)	USA (Pennsylvania)	100%	USA, USVI, insurance
ACE Insurance Company of Texas (EI# 74-1480965, NAIC #22721, 22920, TX)	USA (Texas)	100%	USA, insurance
Illinois Union Insurance Company (EI# 36-2759195, NAIC #27960, IL)	USA (Illinois)	100%	USA, surplus lines insurer
Rain and Hail Insurance Service Incorporated	USA (Iowa)	20%
INAMAR Insurance Underwriting Agency, Inc.	USA (New Jersey)	100%	USA, insurance agency

7

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
INAMAR Insurance Underwriting Agency, Inc. of Massachusetts	USA (Massachusetts)	100%	USA, general agency
INAMAR Insurance Underwriting Agency, Inc. of Texas	USA (Texas)	100%	USA, general agency
INAMAR Insurance Underwriting Agency, Inc. of Ohio	USA (Ohio)	100%	USA, general agency
Insurance Company of North America (EI# 23-0723970, NAIC #22713, PA)	USA (Pennsylvania)	100%	USA, Guam, Northern Mariana Islands, Philippines, Puerto Rico, Taiwan (p/c), insurance
Bankers Standard Insurance Company (EI# 75-1320184, NAIC #18279, PA)	USA (Pennsylvania)	100%	USA, insurance
Bankers Standard Fire and Marine Company (EI#75-6014863, NAIC #20591, PA)	USA (Pennsylvania)	100%	USA, insurance
ACE Property and Casualty Insurance Company (EI# 06-0237820, NAIC, #20699, PA)	USA (Pennsylvania)	100%	USA, Puerto Rico, insurance
ACE Employers Insurance Company (EI# 23-2137343, NAIC #38741, PA)	USA (Pennsylvania)	100%	USA, insurance
ACE Insurance Company of Ohio (EI#23-1859893, NAIC #22764, OH)	USA (Ohio)	100%	USA, insurance
INA Surplus Insurance Company (EI# 52-1208598, NAIC #42072, PA)	USA (Pennsylvania)	100%	USA, reinsurance
ACE Fire Underwriters Insurance Company (EI# 06-6032187, NAIC #20702, PA)	USA (Pennsylvania)	100%	USA, insurance
Atlantic Employers Insurance Company (EI# 23-2173820, NAIC #38938, NJ)	USA (New Jersey)	100%	USA, insurance
Cover-All Technologies, Inc.	USA (Delaware)	7.41%	USA, develop software products for insurance industry
ALIC, Incorporated	USA (Texas)	100%	USA, general agency & attorney-in-fact for ACE Lloyds

8

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
ACE American Lloyds Insurance Company (Sponsored Lloyds Association) (EI# 75-1365570, NAIC #18511, TX)	USA (Texas)	100%	USA, Lloyds Association
ACE Insurance Company of Illinois (EI# 36-2709121, NAIC #22691, IL)	USA (Illinois)	100%	USA, insurance
ACE Insurance Company of the Midwest (EI# 06-0884361, NAIC #26417, IN)	USA (Indiana)	100%	USA, insurance
ATR USA, LLC	USA (Connecticut)	100%	USA, reinsurance intermediary manager
ACE Structured Products, Inc. (formerly INAPRO, Inc.)	USA (Delaware)	100%	USA, insurance management services & underwriting
Recovery Services International, Inc.	USA (Delaware)	100%	USA, subrogation, collection & recovery services
RSI Health Care Recovery, Inc.	USA (Delaware)	100%	USA, subrogation, collection & recovery services
ACE INA International Holdings, Ltd.	USA (Delaware)	100%	USA, international insurance & financial holding company
ACE Insurance S.A.	Macau	99.94%	Macau, insurance
ACE CIIC Holdings Limited	Cayman Islands	100%	Cayman Islands, holding company
ACE CIIC Insurance Company Egypt S.A.E.	Egypt	51%	Egypt, insurance
ACE European Holdings Limited	United Kingdom	100%	United Kingdom, holding company
ACE Life Insurance Company S.A.E.	Egypt	99%	Egypt, life insurance
ACE Synergy Insurance Berhad	Malaysia	51%	Malaysia, insurance
ACE Insurance S.A.-N.V.	Belgium	.0523% 99.9477% (ACE INA Overseas Holdings, Inc.)	Europe, insurance/reinsurance

9

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
ACE Seguros S.A.	Chile	78.104% (AIIH) 12.235% (AFIA Finance Corporation, Agencia en Chile) 9.095% - (AFIA Finance Corp. Chile Limitada)	Chile, insurance
ACE Seguros S.A.	Colombia	99.958%	Colombia, insurance
ACE Seguros S.A.	Ecuador	100%	Ecuador, insurance
ACE Seguros S.A.	Mexico	99.9%	Mexico, insurance/assumed reinsurance
Brandywine Reinsurance Co. (UK) Ltd	United Kingdom	100%	UK, reinsurance
ACE INA UK Limited	United Kingdom	100%	UK, Greece, insurance
Eksupsiri Company Limited	Thailand	49% 50.99% (Nam Ek)	Thailand, holding company
ACE Life Assurance Co. Ltd.	Thailand	75% 25% (Oriental)	Thailand, life insurance
Nam Ek Company Limited	Thailand	49%	Thailand, holding company
Chilena Consolidata Seguros Generales, S.A.	Chile	.65%	Chile, insurance
ACE Insurance Limited	South Africa	100%	South Africa, insurance
ACE Insurance Limited	New Zealand	100%	New Zealand, insurance/reinsurance
ACE International Management Corporation	Pennsylvania	100%	Management Services
Cover Direct, Inc.	USA (Delaware)	100%	Japan, direct marketing service Company
Victoria Hall Company Limited	Bermuda	20%	Bermuda, investment holding
ACE INA G.B. Holdings, Ltd	USA (Delaware)	100%	Delaware, UK, insurance holding
ACE INA Services U.K. Limited	United Kingdom	100%	UK, computer services for affiliates
INACAP Sociedad Anonima	Nicaragua	100%	Nicaragua, holding company
INACAP Reaseguros, Sociedad Anonima	Nicaragua	100%	Nicaragua, reinsurance broker

10

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
Century Inversiones, S.A.	Panama	100%	Panama, reinsurance administrator
Arabia ACE Insurance Company Limited E.C.	Bahrain	25%	Saudi Arabia, insurance & reinsurance
ACE Insurance Limited	Australia	100%	Australia, Pakistan, Thailand, Solomon Islands, Vanuatu, insurance & reinsurance
ACE INA Superannuation Pty. Limited	Australia	100%	Australia, corporate trustee for ACE Australia superannuation plan
ACE Insurance Limited	Pakistan	100%	Pakistan, insurance
ACE INA Overseas Insurance Company Ltd.	Bermuda	100%	Bermuda, insurance/reinsurance, general and long term
ACE Insurance Limited	Singapore	100%	Singapore, insurance
ACE Insurance	Japan	100%	Japan, insurance/reinsurance
ACE Songai Service Kabushikigaisha	Japan	100%	Japanese service company
ACE INA Marketing Group C.A.	Venezuela	100%	Venezuela, services & direct marketing
ACE INA Overseas Holdings, Inc.	USA (Delaware)	100%	Delaware, holding company
INACAN Holdings, Ltd.	Canada	100%	Canada, insurance holding
ACE INA Insurance	Canada	100%	Canada, insurance & reinsurance
ACE INA Life Insurance	Canada	100%	Canada, life insurance
ACE Insurance S.A.-N.V.	Belgium	99.9477% .0523% (AIIH)	Europe, insurance/reinsurance
ACE Insurance Company (EI# 66-0437305, NAIC #30953, PR)	Puerto Rico	100%	Puerto Rico, insurance
ACE Insurance Agency, Inc.	Puerto Rico	100%	Puerto Rico, general agent for ACE American Insurance Company
ACE Insurance Limited	Hong Kong	100%	Hong Kong, insurance
ACE Risk Management International Ltd. (formerly ACE INA Bermuda Insurance Managers Ltd.)	Bermuda	100%	Bermuda, management services for non-affiliates

11

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
DELPANAMA S.A.	Panama	100%	Panama, holding company
INAMEX S.A.	Mexico	100%	Mexico, reinsurance broker
Maritime General Ins. Company Ltd	Trinidad	8.06%	Trinidad insurance
Oriental Equity Holdings Limited	British Virgin Islands	100%	BVI, holding company
ACE Life Assurance Co. Ltd.	Thailand	25% 75% (Eksupsiri)	Thailand, life insurance
AFIA Finance Corporation	USA (Delaware)	100%	Delaware, insurance holding
AFIA Venezolana C.A.	Venezuela	100%	Venezuela, inactive claims & settling agent
ACE ICNA Italy Societa a Responsabilita Limitata	Italy	99.7% 0.3% (AIIH)	Italy, legal representative for CIGNA Insurance Company of Europe, S.A.-N.V.
Siam Liberty Company Limited	Thailand	49% (AFC) 45% (Nam EK)	Thailand, broker, surveyor & claims settling agency
ACE Servicios, S.A.	Argentina	100%	Argentina, service company
AFIA Finance Corp. Chile Limitada	Chile	98% 2% (AIIH)	Chile, claims & settling agent
Fire, Equity and General Insurance Company Limited	Nigeria	6.25%	Nigeria, insurance
Inversiones Continental S.A. de C.V.	Honduras	1.29%	Honduras, insurance holding
PT. ACE INA Insurance	Indonesia	80%	Indonesia, insurance
PT. Adi Citra Mandiri	Indonesia	45%	Indonesia, service company
RIYAD Insurance Co. Ltd.	Bermuda	80%	Bermuda, insurance
Safire Private Ltd.	Singapore	100%	Singapore, management & computer service bureau
AFIA (INA) Corporation, Limited	USA (Delaware)	100%	Delaware, holding company
AFIA	Unincorporated Association	60%	Association for international insurance
AFIA (ACE) Corporation, Limited	USA (Delaware)	100%	Delaware, holding company
AFIA	Unincorporated Association	40%	Association for international insurance
Compania Anonima de Seguros “AVILA”	Venezuela	0.6%	Venezuela, insurance

12

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
INAVEN, C.A. “Venezuela”	Venezuela	100%	Venezuela, corporation
La Positiva Compania Nacional de Seguros Sociedad Anonima	Peru	7.6869%	Peru, insurance
Reaseguradora Nuevo Mundo S.A.	Panama	3.7246%	Panama, reinsurance
Amazones Compania Anonima de Seguros	Ecuador	1.423%	Ecuador, insurance
ACE US Holdings, Inc.	USA (Delaware)	100%	USA, investment holding
ACE Financial Services International, Inc. (f/k/a ACE Financial Solutions International, Inc.)	USA (Delaware)	100%	USA, investment holding
ACE USA, Inc.	USA (Delaware)	100%	USA, investment holding
ASI Administrative Services Inc. (formerly ASI Administrative Services Holdings Inc. and CRC Creditor Resources Canada Ltd.)	Canada (Yukon)	100%	Canada, warranties business
Industrial Underwriters Insurance Company (EI# 75-6015738, NAIC# 21075, TX)	USA (Texas)	100%	USA, insurance
Rhea International Marketing (L), Inc.	Malaysia	60%	Malaysia, general services
Westchester Fire Insurance Company (EI# 13-5481330, NAIC# 21121, NY)	USA (New York)	100%	USA, Bermuda permit, insurance
Westchester Surplus Lines Insurance Company (EI# 58-2139927, NAIC #10172, GA)	USA (Georgia)	100%	USA, insurance
Westchester Specialty Services, Inc.	USA (Florida)	100%	USA, warranties
Westchester Specialty Insurance Services, Inc.	USA (Nevada)	100%	USA, insurance services, brokering, warranties
WDH Corporation	USA (Ohio)	80%	USA, insurance services
Dimension Service Corporation	USA (Ohio)	80%	USA, warranties
Dimension Holdings Inc.	USA (Ohio)	80%	USA, insurance services
ACE Financial Services Inc. (f/k/a Capital Re Corporation)	USA (Delaware)	100%	Delaware, insurance holding company
Capital RE LLC	Turks & Caicos	100%	Turks & Caicos, holding company
ACE (CR) Holdings	United Kingdom	100%	UK, holding co
ACE Capital VII Limited	United Kingdom	100%	UK, Lloyd’s capital vehicle
ACE (RGB) Holdings Limited	United Kingdom	100%	UK, holding company
ACE (CIDR) Limited	United Kingdom	100%	UK, Lloyd’s agency
Global Life Services Limited	United Kingdom	100%	UK, Lloyd’s agency
Ridge Underwriting Agencies Limited	United Kingdom	100%	UK, Lloyd’s agency

13

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
ACE Asset Management Inc.	Delaware	100%	DE, Bermuda permit corporation
ACE (Barbados) Holdings Limited	Barbados	100%	Barbados, holding company

14

SCHEDULE 5.02(A)

LIENS

1. Lien arising under a Subordination Agreement dated as of October 27, 1998 among ACE US Holdings, Inc., ACE Limited and The Chase Manhattan Bank encumbering ACE US Holdings, Inc.’s rights under the Subordinated Loan Agreement dated as of October 27, 1998 among ACE US Holdings, Inc., ACE Bermuda Insurance Ltd. and United States Trust Company of New York, as trustee under the Indenture dated October 27, 1998 of ACE US Holdings, Inc.

2. Liens securing the Fourth Amendment and Restatement of Letter of Credit Facility Agreement dated November 14, 2003 among ACE Limited, ACE Bermuda Insurance Ltd., certain other financial institutions and Citibank International plc, as Agent and Security Trustee.

1

EXHIBIT A

FORM OF ASSIGNMENT AND ACCEPTANCE

ASSIGNMENT AND ACCEPTANCE dated as of                 , 20     between                          (the “Assignor”) and                          (the “Assignee”), and [consented to and] accepted by Wachovia Bank, National Association, as administrative agent (the “Administrative Agent”)[, and ACE Limited (the “Parent”)].

W I T N E S S E T H

WHEREAS, this Assignment and Acceptance (the “Agreement”) relates to the Reimbursement Agreement dated as of September 22, 2004 among the Parent and other Account Parties party thereto, the Assignor and the other Banks party thereto, the Syndication Agent party thereto and the Administrative Agent, providing for a $500,000,000 secured letter of credit facility for the benefit of the Account Parties (as amended or otherwise modified from time to time, the “Reimbursement Agreement”);

WHEREAS, as provided under the Reimbursement Agreement, the Assignor has a commitment to participate in Letters of Credit and make Letter of Credit Advances to the Account Parties in an aggregate principal amount at any time outstanding not to exceed $                    ;

WHEREAS, Letters of Credit with a total amount available for drawing thereunder of $                     are outstanding at the date hereof;

WHEREAS, Letter of Credit Advances made to the Account Parties by the Assignor under the Reimbursement Agreement in the aggregate principal amount of $                     are outstanding at the date hereof; and

WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Reimbursement Agreement and the other Loan Documents in respect of a portion of its LC Commitment Amount thereunder in an amount equal to $                     (the “Assigned Amount”), together with a corresponding portion of its outstanding Letter of Credit Participating Interest, Letter of Credit Participating Interest Commitment, LC Participation Obligations, Letter of Credit Exposure, and Letter of Credit Advances, if any, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows:

1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Reimbursement Agreement.

1

2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Reimbursement Agreement and the other Loan Documents to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Reimbursement Agreement to the extent of the Assigned Amount, including the outstanding Letter of Credit Participating Interest Commitment and Letter of Credit Exposure, and the amount of the Letter of Credit Advances, if any, outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee[, the Administrative Agent and the Parent] and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Reimbursement Agreement with an LC Commitment Amount (in addition to any LC Commitment Amount theretofore held by it) equal to the Assigned Amount, and (ii) the LC Commitment Amount of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor shall be released from its obligations under the Reimbursement Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor.

3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof the amount heretofore agreed between them.¹ It is understood that commitment and Letter of Credit fees accrued to the date hereof in respect of the Assigned Amount are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Reimbursement Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party’s interest therein and shall promptly pay the same to such other party.

4. [Consent of the Administrative Agent and the Parent. Pursuant to the Reimbursement Agreement, this Agreement is conditioned upon the consent of the Administrative Agent and, so long as no Default has occurred and is continuing, the Parent. The execution of this Agreement by the Administrative Agent and, if applicable, the Parent is evidence of this consent.]

5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition or statements of the Account Parties or any of their respective Subsidiaries, or the validity and enforceability of the obligations of the Account Parties or any of their respective Subsidiaries in respect of any Loan Document. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Account Parties and their respective Subsidiaries.

¹ Amount should combine the principal amount of any Letter of Credit Advances made by the Assignor together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum.

2

6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

[Remainder of page intentionally left blank.]

3

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written.

[ASSIGNOR]
By:
Title:
[ASSIGNEE]
By:
Title:
[ACE LIMITED]
By:
Title:
WACHOVIA BANK, NATIONAL ASSOCIATION, as Administrative Agent
By:
Title:	]

4

EXHIBIT B

FORM OF COLLATERAL VALUE REPORT

                    , 200  

Wachovia Bank, National Association,

as Administrative Agent

Charlotte Plaza Building

201 South College Street, 8^th Floor NC0680

Charlotte, North Carolina 28288

Attn: Syndication Agency Services

Ladies and Gentlemen:

Reference is made to the Reimbursement Agreement dated as of September     , 2004 among ACE Limited, ACE Bermuda Insurance Ltd., ACE Tempest Life Reinsurance Ltd. and ACE Tempest Reinsurance Ltd., as Account Parties, the Banks party thereto, and Wachovia Bank, National Association, as Administrative Agent (as amended or otherwise modified from time to time, the “Reimbursement Agreement”). Terms defined in the Reimbursement Agreement are, unless otherwise defined herein or the context otherwise requires, used herein as defined therein.

This Collateral Value Report is delivered pursuant to Section 2.16(b) of the Reimbursement Agreement. The date of this Collateral Value Report is                     , 200   (the “Report Date”). Set forth below is the Collateral Value of the Collateral and certain other information required by Section 2.16(b) of the Reimbursement Agreement as of                     , 200   (the “Valuation Date”), calculated in accordance with the definition of Collateral Value contained in the Reimbursement Agreement and the other provisions of the Agreement (including Schedule III to the Reimbursement Agreement):

Type of Security	Amount/ Market Value	Eligible Percentage	Collateral Value
Cash Denominated in U.S. Dollars		100%
Prime bank certificates of deposit issued by U.S. banks rated Aa3/AA - or better		95%
U.S. Government and U.S. Government Agency Obligations
Maturity 2 years or less Maturity over 2 years		95% of Market 90% of Market
Investment Grade Municipal Bonds (Rating Aaa-Baa3)
Maturity 5 years or less Maturity over 5 years		85% of Market 80% of Market

1

Type of Security	Amount/ Market Value	Eligible Percentage	Collateral Value
Investment Grade Corporate Bonds (Rating Aa3 or better, Non-convertible, NYSE)
Maturity 2 years or less Maturity over 2 years		90% of Market 85% of Market
Investment Grade Corporate Bonds (Rating Baa3 to A1, Non-convertible, NYSE)
Maturity 2 years or less Maturity over 2 years		85% of Market 80% of Market
Commercial Paper (Rating A1-A2, P1-P2)		85% of Market
Total			$

Outstanding Letters of Credit

Beneficiary	Date	Undrawn Amount	Unreimbursed Drawings
		$	$
Total		$	$

Ratio of Aggregate Collateral Value to Letter of Credit Outstandings:                     

The Parent certifies that the foregoing information correctly sets forth the Collateral Value (in the aggregate and for each category of Collateral) and the Letter of Credit Outstandings as of the Valuation Date, that the Letter of Credit Outstandings do not exceed the aggregate Collateral Value as of the Valuation Date, and that nothing has come to the attention of the undersigned to cause the undersigned to believe that the Letter of Credit Outstandings exceed the aggregate Collateral Value as of the Report Date.

ACE LIMITED

By:

Name: 

Title: 

2

EXHIBIT E

FORM OF LETTER OF INSTRUCTION

                    , 200  

Wachovia Bank, National Association

as Administrative Agent

Charlotte Plaza Building

201 South College Street, 8^th Floor NC0680

Charlotte, North Carolina 28288

Attn: Syndication Agency Services

Ladies and Gentlemen:

Reference is made to the Control Agreement (as amended, modified, supplemented or restated from time to time, the “Control Agreement”), dated as of September     , 2004, among the undersigned, State Street Bank and Trust Company, as Custodian (in such capacity, the “Custodian”), and Wachovia Bank, National Association, as administrative agent (in such capacity, together with any successor in such capacity, the “Administrative Agent”). Terms defined in the Control Agreement are, unless otherwise defined herein or the context otherwise requires, used herein as defined therein.

We refer to the notification received from the Administrative Agent pursuant to Section 2.03(a) of the Reimbursement Agreement that requires us to make on the date of this letter a reimbursement payment (the “Required Payment”) with respect to a drawing under a Letter of Credit (as defined in the Reimbursement Agreement) issued under the Reimbursement Agreement. Pursuant to this notification and inasmuch as the Required Payment has not been made, we hereby irrevocably authorize and direct you to liquidate and receive the proceeds of Collateral (as defined in the Reimbursement Agreement) in an amount equal to the Required Payment plus interest thereon as provided in the Reimbursement Agreement.

We further irrevocably authorize and direct you to deliver this letter to the Custodian or any other person or entity (and we agree that the Custodian and any such other person or entity may rely hereon and is hereby irrevocably authorized and instructed to act in reliance hereon without further consent or authorization from us or any other Account Party) as you may deem to be appropriate to give effect to the authorization and direction contained herein.

Very truly yours,

for and on behalf of

EX-10.2

Exhibit 10.2

REIMBURSEMENT AGREEMENT

among

ACE LIMITED

ACE BERMUDA INSURANCE LTD.

ACE TEMPEST LIFE REINSURANCE LTD.

ACE TEMPEST REINSURANCE LTD.,

as Account Parties,

THE BANKS NAMED HEREIN,

WACHOVIA BANK, NATIONAL ASSOCIATION,

as an Issuing Bank and as Administrative Agent

and

BANK OF AMERICA, N.A.,

as Syndication Agent

$850,000,000 Unsecured Letter of Credit Facility

WACHOVIA CAPITAL MARKETS, LLC

BANC OF AMERICA SECURITIES LLC

as Joint Book Runners and Joint Lead Arrangers

Dated as of September 22, 2004

TABLE OF CONTENTS

		Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01	Certain Defined Terms	1
1.02	Computation of Time Periods; Other Definitional Provisions	16
1.03	Accounting Terms and Determinations	16
ARTICLE II
AMOUNTS AND TERMS OF THE LETTERS OF CREDIT
2.01	The Letters of Credit	17
2.02	Issuance and Renewals and Drawings, Participations and Reimbursement with Respect to Letters of Credit	18
2.03	Repayment of Advances	21
2.04	Termination or Reduction of the LC Commitment Amounts	23
2.05	Fees	23
2.06	Increased Costs, Etc.	24
2.07	Payments and Computations	25
2.08	Taxes	26
2.09	Sharing of Payments, Etc.	28
2.10	Use of Letters of Credit	29
2.11	Defaulting Banks	29
2.12	Replacement of Affected Bank	31
2.13	Certain Provisions Relating to the Issuing Banks and Letters of Credit	31
2.14	Downgrade Event with Respect to a Bank	33
2.15	Non–Dollar Letters of Credit	35
2.16	Increase of LC Commitment Amounts	36
ARTICLE III
CONDITIONS OF LENDING AND ISSUANCES OF LETTERS OF CREDIT
3.01	Conditions Precedent to Effective Date	37
3.02	Conditions Precedent to Each Issuance, Extension or Increase of a Letter of Credit	39
3.03	Determinations Under Section 3.01	39
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01	Representations and Warranties of the Account Parties	40

i

ARTICLE V
COVENANTS OF THE ACCOUNT PARTIES
5.01	Affirmative Covenants	43
5.02	Negative Covenants	45
5.03	Reporting Requirements	49
5.04	Financial Covenants	52
ARTICLE VI
EVENTS OF DEFAULT
6.01	Events of Default	52
6.02	Actions in Respect of the Letters of Credit upon Default	54
ARTICLE VII
THE GUARANTY
7.01	The Guaranty	55
7.02	Guaranty Unconditional	56
7.03	Discharge Only upon Payment in Full; Reinstatement in Certain Circumstances	56
7.04	Waiver by the Account Parties	57
7.05	Subrogation	57
7.06	Stay of Acceleration	57
7.07	Continuing Guaranty; Assignments	58
ARTICLE VIII
THE AGENTS
8.01	Authorization and Action	58
8.02	Agents’ Reliance, Etc.	58
8.03	Agents and Affiliates	59
8.04	Bank Credit Decision	59
8.05	Indemnification	59
8.06	Successor Administrative Agent	60
ARTICLE IX
MISCELLANEOUS
9.01	Amendments, Etc.	60
9.02	Notices, Etc.	61
9.03	No Waiver; Remedies	62
9.04	Costs and Expenses	62

ii

9.05	Right of Set-off	63
9.06	Binding Effect	63
9.07	Assignments and Participations	63
9.08	Execution in Counterparts	66
9.09	No Liability of the Issuing Banks	66
9.10	Confidentiality	67
9.11	Jurisdiction, Etc.	67
9.12	Governing Law	68
9.13	Waiver of Jury Trial	68
9.14	Disclosure of Information	68
9.15	USA Patriot Act	68
9.16	Certain Effective Date Matters	69

iii

Schedule I	LC Commitment Amounts
Schedule I – Part 2	Domestic Lending Offices
Schedule II	Existing Letters of Credit
Schedule 4.01(b)	Subsidiaries
Schedule 5.02(a)	Liens
Exhibit A	Form of Assignment and Acceptance
Exhibit B-1	Form of Opinion of Maples and Calder
Exhibit B-2	Form of Opinion of Mayer, Brown, Rowe & Maw LLP
Exhibit B-3	Form of Opinion of Conyers, Dill & Pearman
Exhibit C	Form of Letter regarding Existing Letters of Credit

iv

REIMBURSEMENT AGREEMENT

REIMBURSEMENT AGREEMENT dated as of September 22, 2004, among ACE Limited, a Cayman Islands company (the “Parent”), ACE Bermuda Insurance Ltd., a Bermuda company (“ACE Bermuda”), ACE Tempest Life Reinsurance Ltd., a Bermuda company (“Tempest Life”), and ACE Tempest Reinsurance Ltd., a Bermuda company (“Tempest”) (ACE Bermuda, Tempest Life and Tempest, together with the Parent, the “Account Parties” and individually an “Account Party”), the banks, financial institutions and other institutional lenders listed on the signature pages hereof as the Initial Banks (the “Initial Banks”), Wachovia Bank, National Association (“Wachovia”), as an Issuing Bank (as hereinafter defined), Bank of America, N.A. (“Bank of America”), as syndication agent, (the “Syndication Agent”), Barclays Bank PLC (“Barclays”), as co-documentation agent, CitiBank, N.A. (“CitiBank”), as co-documentation agent, JPMorgan Chase Bank, as co-documentation agent (“Chase” and, together with Barclays and CitiBank, the “Documentation Agents”), and Wachovia, as administrative agent (together with any successor administrative agent appointed pursuant to Article VIII, the “Administrative Agent” and, together with the Syndication Agent and Documentation Agents, the “Agents”) for the Banks.

PRELIMINARY STATEMENTS:

The Account Parties have requested that the Issuing Banks and the Banks make available to the Account Parties a credit facility in an amount up to $850,000,000 to provide for the issuance of letters of credit for the account of one or more of the Account Parties. The Issuing Banks and the Banks have indicated their willingness to agree to make such letters of credit available on the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

1.01 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“Account Parties” has the meaning specified in the recital of parties to this Agreement.

“ACE Bermuda” has the meaning specified in the recital of parties to this Agreement.

“ACE INA” means ACE INA Holdings Inc., a Delaware corporation.

“Additional Bank” has the meaning specified in Section 2.16(a).

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“Adjusted Consolidated Debt” means, at any time, an amount equal to (i) the then outstanding Consolidated Debt of the Parent and its Subsidiaries plus (ii) to the extent exceeding an amount equal to 15% of Total Capitalization, the then issued and outstanding amount of Preferred Securities (other than any Mandatorily Convertible Preferred Securities).

“Administrative Agent” has the meaning specified in the recital of parties to this Agreement.

“Administrative Agent’s Account” means the account of the Administrative Agent maintained by the Administrative Agent at Wachovia Bank, National Association, Charlotte Plaza Building, 201 South College Street, 8^th Floor NC0680, Charlotte, North Carolina 28288, Account No. 5000000027444, Re: ACE Ltd., Attn: Syndication Agency Services, or such other account as the Administrative Agent shall specify in writing to the Banks.

“Advance” means a Letter of Credit Advance.

“Affected Bank” means any Bank that (i) has made, or notified any Account Party that an event or circumstance has occurred which may give rise to, a demand for compensation under Section 2.06(a) or (b) or Section 2.08 (but only so long as the event or circumstance giving rise to such demand or notice is continuing) or (ii) is a Downgraded Bank.

“Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and “under common control with”) of a Person means the possession, direct or indirect, of the power to vote 5% or more of the Voting Interests of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Interests, by contract or otherwise.

“Agents” has the meaning specified in the recital of parties to this Agreement.

“Agreement Currency” has the meaning specified in Section 2.15(g).

“Applicable Account Party” with respect to any outstanding or proposed Letter of Credit means the Account Party for the account of which such Letter of Credit was or is proposed to be issued.

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“Applicable Commitment Fee Percentage” means, as of any date, a percentage per annum determined by reference to the Public Debt Rating in effect on such date as set forth below:

Public Debt Rating S&P/Moody’s	Applicable Commitment Fee Percentage
Level 1 A+/A1 and above	0.060%
Level 2 A/A2	0.080%
Level 3 A-/A3	0.100%
Level 4 BBB+/Baa1	0.125%
Level 5 Lower than Level 4	0.150%

“Applicable Lending Office” means, with respect to each Bank, such Bank’s Domestic Lending Office.

“Applicable Margin” means, as of any date, with respect to either Type of Letter of Credit, a percentage per annum determined by reference to such Type and the Public Debt Rating in effect on such date as set forth below:

Public Debt Rating S&P/Moody’s	Applicable Margin for Intercompany Letters of Credit	Applicable Margin for Third Party Letters of Credit
Level 1 A+/A1 and above	0.300%	0.350%
Level 2 A/A2	0.400%	0.425%
Level 3 A-/A3	0.450%	0.475%
Level 4 BBB+/Baa1	0.500%	0.525%
Level 5 Lower than Level 4	0.600%	0.625%

provided, however, that at all times during which the Available Amount with respect to Intercompany Letters of Credit exceeds $200,000,000, then for purposes of Section 2.05(c)(i) the Applicable Margin for the portion of the Available Amount of such Intercompany Letters of Credit in excess of $200,000,000 shall be determined as if such Letters of Credit were Third Party Letters of Credit.

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“Approved Investment” means any Investment that was made by the Parent or any of its Subsidiaries pursuant to investment guidelines set forth by the board of directors of the Parent which are consistent with past practices.

“Assignment and Acceptance” means an assignment and acceptance entered into by a Bank and an Eligible Assignee, and accepted by the Administrative Agent, in accordance with Section 9.07 and in substantially the form of Exhibit A hereto.

“Available Amount” of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time or at any future time (assuming compliance at such time or such future time with all conditions to drawing) (including without limitation amounts which have been the subject of drawings by the applicable beneficiary but which have not yet been paid by an Issuing Bank).

“Bank of America” has the meaning specified in the recital of parties to this Agreement.

“Bankruptcy Law” means Title 11, U.S. Code, or any similar foreign, federal or state law for the relief of debtors.

“Banks” means the Initial Banks and each Person that shall become a Bank hereunder pursuant to Section 2.16(a) or Section 9.07(a), (b) and (c) for so long as such Initial Bank or Person, as the case may be, shall be a party to this Agreement.

“Barclays” has the meaning specified in the recital of parties to this Agreement.

“Base Amount” has the meaning set forth in Section 5.04(b).

“Base Rate” means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the rate of interest announced publicly by Wachovia in Charlotte, North Carolina from time to time, as Wachovia’s prime rate (which may not be its best lending rate) or, if higher on the day in question, ½ of 1% above the Federal Funds Rate.

“Bilateral Agreements” means (i) the Insurance and Reinsurance Letters of Credit Agreement dated November 20, 2003 issued by Barclays relating to the Lloyd’s Dollar Trust Funds of Syndicate 2488; and (ii) the Insurance Letters of Credit – Master Agreement dated April 20, 1994 between Tempest (then known as Tempest Reinsurance Company Limited) and CitiBank.

“Business Day” means a day of the year on which banks are not required or authorized by law to close in Charlotte, North Carolina, New York, New York, London, England or Bermuda.

“Capitalized Leases” means all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases.

“Change of Control” means the occurrence of any of the following: (a) any Person or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities

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Exchange Act of 1934), directly or indirectly, of Voting Interests of the Parent (or other securities convertible into such Voting Interests) representing 30% or more of the combined voting power of all Voting Interests of the Parent or (b) a majority of the board of directors of the Parent shall not be Continuing Members.

“CitiBank” has the meaning specified in the recital of parties to this Agreement.

“Committed Facility” means, at any time, the aggregate amount of the Banks’ LC Commitment Amounts at such time.

“Confidential Information” means information that any Loan Party furnishes to any Agent or any Bank, but does not include any such information that is or becomes generally available to the public other than as a result of a breach by any Agent or any Bank of its obligations hereunder or that is or becomes available to such Agent or such Bank from a source other than the Loan Parties that is not, to the best of such Agent’s or such Bank’s knowledge, acting in violation of a confidentiality agreement with a Loan Party.

“Consolidated” refers to the consolidation of accounts in accordance with GAAP.

“Consolidated Net Income” means, for any period, the net income of the Parent and its Consolidated Subsidiaries, determined on a Consolidated basis for such period.

“Consolidated Net Worth” means at any date the Consolidated stockholders’ equity of the Parent and its Consolidated Subsidiaries determined as of such date, provided that such determination for purposes of Section 5.04 shall be made without giving effect to adjustments pursuant to Statement No. 115 of the Financial Accounting Standards Board of the United States of America.

“Contingent Obligation” means, with respect to any Person, any obligation or arrangement of such Person to guarantee or intended to guarantee any Debt, leases, dividends or other payment obligations (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, (a) the direct or indirect guarantee, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of a primary obligor, (b) the obligation to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement or (c) any obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that Contingent Obligations shall not include any obligations of any such Person arising under insurance contracts entered into in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the

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primary obligation in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder), as determined by such Person in good faith.

“Continuing Member” means a member of the Board of Directors of the Parent who either (i) was a member of the Parent’s Board of Directors on the date of execution and delivery of this Agreement by the Parent and has been such continuously thereafter or (ii) became a member of such Board of Directors after such date and whose election or nomination for election was approved by a vote of the majority of the Continuing Members then members of the Parent’s Board of Directors.

“Debenture” means debt securities issued by ACE INA or the Parent to a Special Purpose Trust in exchange for proceeds of Preferred Securities and common securities of such Special Purpose Trust.

“Debt” of any Person means, without duplication for purposes of calculating financial ratios, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of such Person’s business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all obligations of such Person as lessee under Capitalized Leases (excluding imputed interest), (f) all obligations of such Person under acceptance, letter of credit or similar facilities, (g) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interests (except for obligations to pay for Equity Interests within customary settlement periods) in such Person or any other Person or any warrants, rights or options to acquire such capital stock (excluding payments under a contract for the forward sale of ordinary shares of such Person issued in a public offering), valued, in the case of Redeemable Preferred Interests, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (h) all Contingent Obligations of such Person in respect of Debt (of the types described above) of any other Person and (i) all indebtedness and other payment obligations referred to in clauses (a) through (h) above of another Person secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness or other payment obligations; provided, however, that the amount of Debt of such Person under clause (i) above shall, if such Person has not assumed or otherwise become liable for any such Debt, be limited to the lesser of the principal amount of such Debt or the fair market value of all property of such Person securing such Debt; provided further that “Debt” shall not include obligations in respect of insurance or reinsurance contracts entered into in the ordinary course of business or any obligations of such Person (1) to purchase securities (or other property) which arise out of or in connection with the sale of the same or substantially similar securities (or other property) or (2) to return collateral consisting of securities arising out of or in connection

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with the loan of the same or substantially similar securities; provided further that, solely for purposes of Section 5.04 and the definitions of “Adjusted Consolidated Debt” and “Total Capitalization”, “Debt” shall not include (x) any contingent obligations of any Person under or in connection with acceptance, letter of credit or similar facilities or (y) obligations of the Parent or ACE INA under any Debentures or under any subordinated guaranty of any Preferred Securities or obligations of a Special Purpose Trust under any Preferred Securities.

“Default” means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.

“Defaulted Amount” means, with respect to any Bank at any time, any amount required to be paid by such Bank to any Agent or any other Bank hereunder or under any other Loan Document at or prior to such time that has not been so paid as of such time, including, without limitation, any amount required to be paid by such Bank to (a) an Issuing Bank pursuant to Section 2.02(f) to purchase a portion of a Letter of Credit Advance made by such Issuing Bank and (b) any Agent or any Issuing Bank pursuant to Section 8.05 to reimburse such Agent or such Issuing Bank for such Bank’s ratable share of any amount required to be paid by the Banks to such Agent or such Issuing Bank as provided therein.

“Defaulting Bank” means, at any time, any Bank that, at such time, (a) owes a Defaulted Amount or (b) shall take any action or be the subject of any action or proceeding of a type described in Section 6.01(g).

“Documentation Agents” has the meaning specified in the recital of parties to this Agreement.

“Dollar Equivalent” has the meaning specified in Section 2.15(h).

“Domestic Lending Office” means, with respect to any Bank, the office of such Bank specified as its “Domestic Lending Office” opposite its name on Part 2 of Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Bank, as the case may be, or such other office of such Bank as such Bank may from time to time specify to any Account Party and the Administrative Agent.

“Downgrade Account” has the meaning specified in Section 2.14(a).

“Downgrade Event” means, with respect to any Bank, a reduction of the credit rating for the senior unsecured unsupported long-term debt of such Bank (or, if no such rating exists, then a reduction of the long-term issuer credit rating of such Bank) by S&P or Moody’s.

“Downgrade Notice” has the meaning specified in Section 2.14(a).

“Downgraded Bank” means any Bank which has a credit rating of less than A- (in the case of S&P) or A3 (in the case of Moody’s) for its senior unsecured unsupported long-term debt or which does not have any credit rating on such debt from one of S&P or Moody’s; provided, that if at any time such Bank has no such senior unsecured unsupported long-term debt rating from either rating service but does have a long-term issuer credit rating from either or both

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services, then such Bank shall not be considered a Downgraded Bank so long as such long-term issuer credit rating remains at or above A- (in the case of S&P) or A3 (in the case of Moody’s).

“Effective Date” means the first date on which the conditions set forth in Article III shall have been satisfied.

“Eligible Assignee” means (i) a Bank, (ii) an Affiliate of a Bank, or (iii) a commercial bank, a savings bank or other financial institution that is approved by the Administrative Agent and, unless an Event of Default has occurred and is continuing at the time any assignment is effected pursuant to Section 9.07, the Parent (such approvals not to be unreasonably withheld or delayed); provided, however, that neither any Loan Party nor any Affiliate of a Loan Party shall qualify as an Eligible Assignee under this definition.

“Environmental Action” means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, any Environmental Permit or Hazardous Material or arising from alleged injury or threat to health, safety or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief.

“Environmental Law” means any federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, writ, judgment, injunction, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment, health, safety or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials.

“Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

“Equity Interests” means, with respect to any Person, shares of capital stock of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or other acquisition from such Person of such shares (or such other interests), and other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

“ERISA Affiliate” means any Person that for purposes of Title IV of ERISA is a member of the controlled group of any Loan Party, or under common control with any Loan Party, within the meaning of Section 414 of the Internal Revenue Code or Section 4001 of ERISA.

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“Events of Default” has the meaning specified in Section 6.01.

“Existing Letters of Credit” means, collectively, the letters of credit outstanding on the Effective Date issued by (i) Wachovia pursuant to the Existing Reimbursement Agreement, and (ii) CitiBank and Barclays pursuant to the Bilateral Agreements, which letters of credit are listed on Schedule II hereto.

“Existing Reimbursement Agreement” means the Reimbursement Agreement, dated as of September 25, 2003, among the Account Parties, the banks and other lenders named therein, Bank of America, The Bank of Nova Scotia, Bank One, NA and Deutsche Bank AG, New York Branch, as Co-Syndication Agents, and Wachovia, as Issuing Bank and as Administrative Agent, as amended, providing for a $500,000,000 unsecured letter of credit facility for the benefit of the Account Parties.

“Existing Secured Reimbursement Agreement” means the Reimbursement Agreement, dated as of September 25, 2003, among the Account Parties, the banks and other lenders named therein, Bank of America, The Bank of Nova Scotia, Bank One, NA and Deutsche Bank AG, New York Branch, as Co-Syndication Agents, and Wachovia, as Issuing Bank and as Administrative Agent, as amended, providing for a $500,000,000 secured letter of credit facility for the benefit of the Account Parties.

“Expiration Date” shall mean September 22, 2007.

“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it.

“Fee Letter” means the fee letter dated August 18, 2004 among the Parent, Wachovia and Wachovia Capital Markets, LLC, as amended.

“Fiscal Year” means the fiscal year of the Parent and its Consolidated Subsidiaries ending on December 31 in any calendar year.

“Foreign Government Scheme or Arrangement” has the meaning specified in Section 4.01(l)(ii).

“Foreign Plan” has the meaning specified in Section 4.01(l)(ii).

“GAAP” has the meaning specified in Section 1.03.

“Guaranty” means the undertaking by each of the Account Parties under Article VII.

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“Hazardous Materials” means (a) petroleum or petroleum products, by-products or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law.

“Hedge Agreements” means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other hedging agreements.

“Indemnified Party” has the meaning specified in Section 9.04(b).

“Initial Banks” has the meaning specified in the recital of parties to this Agreement.

“Intercompany Letter of Credit” means a Letter of Credit issued for the account of any Account Party (whether alone or jointly with any one or more other wholly owned Subsidiaries of the Parent) in favor of one or more beneficiaries each of which is a wholly owned Subsidiary of the Parent (whether or not any such beneficiary is an Account Party hereunder).

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

“Investment” in any Person means any loan or advance to such Person, any purchase or other acquisition of any Equity Interests or Debt or the assets comprising a division or business unit or a substantial part or all of the business of such Person, any capital contribution to such Person or any other direct or indirect investment in such Person, including, without limitation, any acquisition by way of a merger or consolidation and any arrangement pursuant to which the investor incurs Debt of the types referred to in clause (h) or (i) of the definition of “Debt” in respect of such Person; provided, however, that any purchase by any Loan Party or any Subsidiary of any catastrophe-linked instruments which are (x) issued for the purpose of transferring traditional reinsurance risk to the capital markets and (y) purchased by such Loan Party or Subsidiary in accordance with its customary reinsurance underwriting procedures, or the entry by any Loan Party or any Subsidiary into swap instruments relating to such instruments in accordance with such procedures, shall be deemed to be the entry by such Person into a reinsurance contract and shall not be deemed to be an Investment by such Person.

“Issuing Banks” means Wachovia, CitiBank, Barclays and any other Bank that has been appointed by the Parent, has accepted such appointment and has been approved in writing by the Administrative Agent (which approval shall not be unreasonably withheld).

“Joint Lead Arrangers” means Wachovia Capital Markets, LLC and Banc of America Sercurities, LLC, collectively.

“JPMorgan Credit Agreement” has the meaning specified in Section 5.02(a)(xvii).

“Judgment Currency” has the meaning specified in Section 2.15(g).

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“LC Commitment Amount” means, with respect to any Bank at any time, the amount set forth opposite such Bank’s name on Schedule I hereto under the caption “LC Commitment Amount” or, if such Bank has entered into one or more Assignment and Acceptances or has become a Bank, or has increased its LC Commitment pursuant to Section 2.16, set forth for such Bank in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such Bank’s “LC Commitment Amount”, as such amount may be reduced at or prior to such time pursuant to Section 2.04.

“LC Participation Obligations” has the meaning specified in Section 2.14(a).

“L/C Related Documents” has the meaning specified in Section 2.03(a)(ii).

“Letter of Credit Advance” has the meaning specified in Section 2.02(g).

“Letter of Credit Agreement” has the meaning specified in Section 2.02(a).

“Letter of Credit Exposure” at any time means the sum at such time of (a) the aggregate outstanding amount of Letter of Credit Advances, (b) the aggregate Available Amounts of all outstanding Letters of Credit (including, without limitation, all outstanding Existing Letters of Credit) and (c) the aggregate Available Amounts of all Letters of Credit which have been requested by an Account Party to be issued hereunder but have not yet been so issued.

“Letter of Credit Participating Interest” has the meaning specified in Section 2.02(e).

“Letter of Credit Participating Interest Commitment” has the meaning specified in Section 2.02(e).

“Letter of Credit Participating Interest Percentage” means, for any Bank, a fraction, expressed as a percentage, the numerator of which is such Bank’s LC Commitment Amount and the denominator of which is the aggregate LC Commitment Amounts of all the Banks.

“Letters of Credit” has the meaning specified in Section 2.01.

“Lien” means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property.

“Loan Documents” means (i) this Agreement, (ii) the Fee Letter and (iii) each Letter of Credit Agreement, in each case as amended from time to time.

“Loan Parties” means the Account Parties.

“Mandatorily Convertible Preferred Securities” means units comprised of (i) Preferred Securities or preferred shares of Parent and (ii) a contract for the sale of ordinary shares of the Parent.

“Margin Stock” has the meaning specified in Regulation U.

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“Material Adverse Change” means any material adverse change in the business, financial condition, operations or properties of the Parent and its Subsidiaries, taken as a whole.

“Material Adverse Effect” means a material adverse effect on (a) the business, condition, operations or properties of the Parent and its Subsidiaries, taken as a whole, (b) the rights and remedies of the Administrative Agent, any Issuing Bank or any Bank under any Loan Document or (c) the ability of the Loan Parties, taken as a whole, to perform their obligations under the Loan Documents.

“Material Financial Obligation” means a principal amount of Debt and/or payment obligations in respect of any Hedge Agreement of the Parent and/or one or more of its Subsidiaries arising in one or more related or unrelated transactions exceeding in the aggregate $50,000,000.

“Material Subsidiary” means (i) any Subsidiary of the Parent that has more than $10,000,000 in assets or that had more than $10,000,000 of revenue during the most recent period of four fiscal quarters for which financial statements are available, and (ii) any Subsidiary that is the direct or indirect parent company of any Subsidiary that qualified as a “Material Subsidiary” under clause (i) above.

“Minimum Amount” has the meaning set forth in Section 5.04(b).

“Moody’s” means Moody’s Investors Service, Inc.

“Multiemployer Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions.

“Net Proceeds” means, with respect to any issuance of Equity Interests by any Person, the amount of cash received by such Person in connection with such transaction after deducting therefrom the aggregate, without duplication, of the following amounts to the extent properly attributable to such transaction: (a) reasonable brokerage commissions, attorneys’ fees, finder’s fees, financial advisory fees, accounting fees, underwriting fees, investment banking fees, and other similar commissions, and fees and expenses and disbursements of any of the foregoing, in each case to the extent paid or payable by such Person; (b) printing and related expenses of filing and recording or registration fees or charges or similar fees or charges paid by such Person; and (c) taxes paid or payable by such Person to any governmental authority or regulatory body as a result of such transaction.

“Non-Dollar Letters of Credit” has the meaning specified in Section 2.15(a).

“Other Taxes” has the meaning specified in Section 2.08(b).

“Overnight Rate” has the meaning specified in Section 2.15(h).

“Parent” has the meaning specified in the recital of parties to this Agreement.

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“Patriot Act” has the meaning specified in Section 9.15.

“PBGC” means the Pension Benefit Guaranty Corporation (or any successor).

“Pension Plan” means a “pension plan”, as such term is defined in section 3(2) of ERISA, which is subject to title IV of ERISA (other than any “multiemployer plan” as such term is defined in section 4001(a)(3) of ERISA), and to which any Loan Party or any ERISA Affiliate may have any liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.

“Permitted Liens” means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced or which are being contested in good faith by appropriate proceedings: (a) Liens for taxes, assessments and governmental charges or levies not yet due and payable; (b) Liens imposed by law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s Liens and other similar Liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than 90 days; (c) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations; and (d) easements, rights of way and other encumbrances on title to real property that do not render title to the property encumbered thereby unmarketable or materially adversely affect the use of such property for its present purposes.

“Person” means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.

“Preferred Interests” means, with respect to any Person, Equity Interests issued by such Person that are entitled to a preference or priority over any other Equity Interests issued by such Person upon any distribution of such Person’s property and assets, whether by dividend or upon liquidation.

“Preferred Securities” means (i) preferred securities issued by a Special Purpose Trust which shall provide, among other things, that dividends shall be payable only out of proceeds of interest payments on the Debentures, or (ii) other instruments that may be treated in whole or in part as equity for rating agency purposes while being treated as debt for tax purposes.

“Pro Rata” means from and to the Banks in accordance with their respective Letter of Credit Participating Interest Percentages.

“Pro Rata Share” means, for any Bank, its share determined Pro Rata, in accordance with the definition of the term “Pro Rata.”

“Public Debt Rating” means, as of any date, the higher rating that has been most recently announced by either S&P or Moody’s, as the case may be, for any class of non-credit enhanced long-term senior unsecured debt issued by the Parent; provided that if at any time the difference between the ratings of such type most recently announced by S&P and Moody’s is more than one rating grade, the Public Debt Rating shall be the rating that is one grade below the higher of such

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two ratings. For purposes of the foregoing, (a) if only one of S&P and Moody’s shall have in effect a rating for any class of non-credit enhanced long-term senior unsecured debt issued by the Parent, the Public Debt Rating shall be the available rating; (b) if neither S&P nor Moody’s shall have in effect a rating for any class of non-credit enhanced long-term senior unsecured debt issued by the Parent, the Public Debt Rating shall be the rating which is three rating levels below the Parent’s S&P financial strength rating at such time, provided that, in the event that the Parent’s S&P financial strength rating is affirmed at (i) A+, the applicable Level will be Level 2 and (ii) A+ and on credit watch/review with negative implications, the applicable Level will be Level 3; (c) if any rating established by S&P or Moody’s shall be changed, such change shall be effective as of the date on which such change is first announced publicly by the rating agency making such change; and (d) if S&P or Moody’s shall change the basis on which ratings are established, each reference herein to ratings announced by S&P or Moody’s, as the case may be, shall refer to the then equivalent rating by S&P or Moody’s, as the case may be.

“Redeemable” means, with respect to any Equity Interest, any Debt or any other right or obligation, any such Equity Interest, Debt, right or obligation that (a) the issuer has undertaken to redeem at a fixed or determinable date or dates, whether by operation of a sinking fund or otherwise, or upon the occurrence of a condition not solely within the control of the issuer or (b) is redeemable at the option of the holder.

“Register” has the meaning specified in Section 9.07(d).

“Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time.

“Required Banks” means, at any time, Banks owed or holding at least a majority in interest of the sum of (a) aggregate principal amount of the Letter of Credit Advances outstanding at such time and (b) the aggregate Available Amount of all Letters of Credit outstanding at such time, or, if no such principal amount and no Letters of Credit are outstanding at such time, Banks having LC Commitment Amounts constituting at least a majority in interest of the aggregate of the LC Commitment Amounts; provided, however, that if any Bank shall be a Defaulting Bank at such time, there shall be excluded from the determination of Required Banks at such time (A) the aggregate principal amount of the interest of such Bank in Letter of Credit Advances and outstanding at such time, (B) such Bank’s Pro Rata Share of the aggregate Available Amount of all Letters of Credit outstanding at such time and (C) the Unused LC Commitment Amount of such Bank at such time.

“Responsible Officer” means the Chairman, Chief Executive Officer, President, Chief Financial Officer, Chief Accounting Officer, Treasurer or General Counsel of the Parent.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.

“Secured Letter of Credit Facility” means the $500,000,000 secured letter of credit facility for the benefit of the Account Parties evidenced by the Reimbursement Agreement, dated as of even date herewith, among the Account Parties, the banks and other lenders named therein, Bank of America, as Syndication Agent, Barclays and CitiBank, as Issuing Banks, and

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Wachovia, as an Issuing Bank and as Administrative Agent (as amended or otherwise modified from time to time).

“Securitization Transaction” means any sale, assignment or other transfer by Parent or any Subsidiary of any accounts receivable, premium finance loan receivables, lease receivables or other payment obligations owing to Parent or such Subsidiary or any interest in any of the foregoing, together in each case with any collections and other proceeds thereof, any collection or deposit accounts related thereto, and any collateral, guaranties or other property or claims in favor of Parent or such Subsidiary supporting or securing payment by the obligor thereon of, or otherwise related to, any such receivables.

“Significant Subsidiary” means a Subsidiary of Parent that is a “significant subsidiary” of the Parent under Regulation S-X promulgated by the Securities and Exchange Commission.

“Solvent” and “Solvency” mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Special Purpose Trust” means a special purpose business trust established by the Parent or ACE INA of which the Parent or ACE INA will hold all the common securities, which will be the issuer of the Preferred Securities, and which will loan to the Parent or ACE INA (such loan being evidenced by the Debentures) the net proceeds of the issuance and sale of the Preferred Securities and common securities of such Special Purpose Trust.

“Subsidiary” of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership, joint venture or limited liability company or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.

“Subsidiary Guarantors” means the Account Parties (other than the Parent).

“Syndication Agent” has the meaning specified in the recital of parties to this Agreement.

“Taxes” has the meaning specified in Section 2.08(a).

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“Tempest” has the meaning specified in the recital of parties to this Agreement.

“Tempest Life” has the meaning specified in the recital of parties to this Agreement.

“Third Party Letter of Credit” means a Letter of Credit other than an Intercompany Letter of Credit.

“Total Capitalization” means, at any time, an amount (without duplication) equal to (i) the then outstanding Consolidated Debt of the Parent and its Subsidiaries plus (ii) Consolidated stockholders equity of the Parent and its Subsidiaries plus (without duplication) (iii) the then issued and outstanding amount of Preferred Securities (including Mandatorily Convertible Preferred Securities) and (without duplication) Debentures.

“Type”, with respect to any Letter of Credit, means and refers to whether such Letter of Credit is an Intercompany Letter of Credit or a Third Party Letter of Credit.

“Unused LC Commitment Amount” means, with respect to any Bank at any time, (a) such Bank’s LC Commitment Amount at such time minus (b) such Bank’s Pro Rata Share of (i) the aggregate Available Amount of all Letters of Credit hereunder (including, without limitation, all Existing Letters of Credit) and (ii) the aggregate principal amount of all Letter of Credit Advances made by the Issuing Banks pursuant to Section 2.02(g) and outstanding at such time (whether held by the Issuing Banks or the Banks).

“Voting Interests” means shares of capital stock issued by a corporation, or equivalent Equity Interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency.

“Wachovia” has the meaning specified in the recital of parties to this Agreement.

“Welfare Plan” means a welfare plan, as defined in Section 3(1) of ERISA, that is maintained for employees of any Loan Party or in respect of which any Loan Party could have liability.

“Withdrawal Liability” has the meaning specified in Part I of Subtitle E of Title IV of ERISA.

1.02 Computation of Time Periods; Other Definitional Provisions. In this Agreement and the other Loan Documents in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding”. References in the Loan Documents to any agreement or contract “as amended” shall mean and be a reference to such agreement or contract as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with its terms.

1.03 Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in

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accordance with generally accepted accounting principles as in effect from time to time in the United States of America (“GAAP”), applied on a basis consistent (except for changes concurred in by the Parent’s independent public accountants) with the most recent audited consolidated financial statements of the Parent and its Subsidiaries delivered to the Banks; provided that, if the Parent notifies the Administrative Agent that the Parent wishes to amend any covenant in Article V to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Administrative Agent notifies the Parent that the Required Banks wish to amend Article V for such purpose), then the Parent’s compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective (and, concurrently with the delivery of any financial statements required to be delivered hereunder, the Parent shall provide a statement of reconciliation conforming such financial information to such generally accepted accounting principles as previously in effect), until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Parent and the Required Banks.

ARTICLE II

AMOUNTS AND TERMS OF

THE LETTERS OF CREDIT

2.01 The Letters of Credit. Each Issuing Bank agrees, on the terms and subject to the conditions herein set forth, to issue standby letters of credit (the “Letters of Credit”) for the account of any Account Party on any Business Day from time to time during the period from the Effective Date to the Expiration Date. From and after the Effective Date, the Existing Letters of Credit shall be Letters of Credit hereunder. Letters of Credit may be issued as Intercompany Letters of Credit or Third Party Letters of Credit, subject to the terms and conditions of this Agreement. No Issuing Bank shall have any obligation to issue, and no Account Party will request the issuance of, any Letter of Credit hereunder if either (a) the aggregate Available Amounts of all Letters of Credit issued by such Issuing Bank would exceed, after giving effect to such issuance, the maximum amount set forth in a letter agreement between such Issuing Bank and the Parent, on behalf of the Account Parties, or (b) any Bank’s Pro Rata Share of the Available Amount of such Letter of Credit exceeds, immediately before the time of such issuance, an amount equal to such Bank’s Pro Rata Share of the total Unused LC Commitment Amounts of the Banks at such time (as such amount shall be advised by the Administrative Agent to the respective Issuing Bank as contemplated by Section 2.02). Unless all the Banks consent otherwise in writing, no Issuing Bank shall have any obligation to issue, and no Account Party shall request the issuance of, any Letter of Credit hereunder if the Available Amount of such Letter of Credit exceeds, immediately before the time of such issuance, an amount equal to the total Unused LC Commitment Amounts of the Banks at such time (as such amount shall be advised by the Administrative Agent to the respective Issuing Bank as contemplated by Section 2.02). No Issuing Bank shall have any obligation to issue, and no Account Party shall request the issuance of, any Letter of Credit except within the following limitations: (i) subject to the provisions of Section 2.15, each Letter of Credit shall be denominated in U.S. dollars, (ii) each Letter of Credit shall be payable only against sight drafts (and not time drafts) and (iii) no Letter of Credit shall have an expiration date (including all rights of the Applicable Account Party or the beneficiary to require renewal) later than one year after the date of issuance thereof,

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but a Letter of Credit may by its terms be automatically renewable annually unless the respective Issuing Bank notifies the beneficiary thereof of its election not to renew such Letter of Credit (which such Issuing Bank agrees to do on and subject to the terms of Section 2.02(d)). No Issuing Bank shall have any obligation to issue any letter of credit which is unsatisfactory in form, substance or beneficiary to such Issuing Bank in the exercise of its reasonable judgment consistent with its customary practice. Letters of Credit may be issued for the account of any Subsidiary of the Parent that is not an Account Party hereunder, provided that the Parent shall be a joint applicant and account party with respect to any such Letter of Credit.

2.02 Issuance and Renewals and Drawings, Participations and Reimbursement with Respect to Letters of Credit.

(a) Request for Issuance. An Account Party may from time to time request, upon at least three Business Days’ notice (given not later than 11:00 A.M. Charlotte, North Carolina time on the last day permitted therefor), an Issuing Bank issue or renew (other than any automatic renewal thereof) a Letter of Credit by:

(i) delivering to such Issuing Bank, with a copy to the Administrative Agent, either (x) a written request to such effect or (y) a request made in electronic form through such Issuing Bank’s remote access system and in accordance with the terms and conditions (including any written agreements between such Issuing Bank and any Account Party) applicable thereto, in each case specifying the date on which such Letter of Credit is to be issued (which shall be a Business Day), the expiration date thereof, the Available Amount thereof, the name and address of the beneficiary thereof and the form thereof, and in each case with a copy of such request (or, in the case of clause (y) above, a written or electronic summary thereof) to the Administrative Agent; and

(ii) in the case of the issuance of a Letter of Credit, delivering to such Issuing Bank, with a copy to the Administrative Agent, a completed agreement and application with respect to such Letter of Credit as such Issuing Bank may specify for use in connection with such requested Letter of Credit (a “Letter of Credit Agreement”), together with such other certificates, documents and other papers or information as are specified in such Letter of Credit Agreement or as may be required pursuant to such Issuing Bank’s customary practices for the issuance of letters of credit (including requirements relating to requests made through such Issuing Bank’s remote access system).

If the limitation set forth in Section 2.01(b) is satisfied and if the Required Banks have not given notice to the Administrative Agent to cease issuing or renewing Letters of Credit as contemplated by this Agreement, the Administrative Agent shall promptly notify the respective Issuing Bank (in writing or by telephone immediately confirmed in writing) that such Issuing Bank is authorized to issue or renew, as the case may be, such Letter of Credit. An Issuing Bank shall not issue or renew, as the case may be, any Letter of Credit (other than by the automatic renewal thereof) unless it shall have received notice from the Administrative Agent that it is authorized to do so as described in the preceding sentence. If such Issuing Bank issues or renews a Letter of Credit, it shall deliver the original of such Letter of Credit to the beneficiary thereof

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or as the Applicable Account Party shall otherwise direct, and shall promptly notify the Administrative Agent thereof and furnish a copy thereof to the Administrative Agent. Each Issuing Bank may issue Letters of Credit through any of its branches or Affiliates (whether domestic or foreign) that issue letters of credit, and each Account Party authorizes and directs each Issuing Bank to select the branch or Affiliate that will issue or process any Letter of Credit.

(b) Request for Extension or Increase. An Account Party may from time to time request an Issuing Bank extend the expiration date of an outstanding Letter of Credit issued for its account or increase (or, with the consent of the beneficiary, decrease) the Available Amount of or the amount available to be drawn on such Letter of Credit by delivering to such Issuing Bank, with a copy to the Administrative Agent, either (i) a written request to such effect or (ii) a request made in electronic form through such Issuing Bank’s remote access system. Such extension or increase shall for all purposes hereunder (including for purposes of Section 2.02(a)) be treated as though such Account Party had requested issuance of a replacement Letter of Credit (except only that such Issuing Bank may, if it elects, issue a notice of extension or increase in lieu of issuing a new Letter of Credit in substitution for the outstanding Letter of Credit).

(c) Automatic Renewals. If any Letter of Credit shall provide for the automatic renewal of the expiry date thereof unless the respective Issuing Bank gives notice that such expiry date shall not be renewed, then the respective Issuing Bank shall allow such Letter of Credit to be renewed unless it shall have received, at least five days prior to the date on which such notice of nonrenewal must be delivered under such Letter of Credit (or such shorter period acceptable to the respective Issuing Bank) (i) notice from the Administrative Agent that such Issuing Bank is not authorized to renew such Letter of Credit (or Letters of Credit generally), or (ii) notice from any Account Party that it does not want the Issuing Bank to renew such Letter of Credit. An Issuing Bank shall not allow any Letter of Credit to be automatically renewed if it has received notice from the Administrative Agent, as described in the preceding sentence, that it is not authorized to do so anytime prior to the date five days prior to the date on which the notice of nonrenewal must be delivered under such Letter of Credit.

(d) Limitations on Issuance, Extension, Renewal and Amendment. As between each Issuing Bank, on the one hand, and the Agents and the Banks, on the other hand, each Issuing Bank shall be justified and fully protected (i) in issuing or renewing a proposed Letter of Credit (other than by the automatic renewal thereof) if such Issuing Bank has received notice from the Administrative Agent that such Issuing Bank is authorized to issue or renew such Letter of Credit, and (ii) in allowing a Letter of Credit to be automatically renewed if such Issuing Bank has not received notice from the Administrative Agent as provided in Section 2.02(c) hereof that it is not authorized to do so at any time prior to the date five days prior to the date on which the notice of nonrenewal must be delivered under such Letter of Credit, in either case, notwithstanding any subsequent notices to such Issuing Bank, any knowledge of a Default, any knowledge of failure of any condition specified in Article III hereof to be satisfied, any other knowledge of such Issuing Bank, or any other event, condition or circumstance whatsoever. Each Issuing Bank may amend, modify or supplement Letters of Credit or Letter of Credit Agreements, or waive compliance with any condition of issuance, renewal or payment, without the consent of, and without liability to, any Agent or any Bank, provided that any such amendment, modification or supplement that extends the expiration date or increases the Available Amount of or the amount available to be drawn on an outstanding Letter of Credit

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shall be subject to Section 2.01. With respect to each Letter of Credit that remains outstanding at any time after the Expiration Date and that provides by its terms for automatic renewal, the respective Issuing Bank shall notify the beneficiary thereof, in accordance with the terms specified for such notice in such Letter of Credit, of such Issuing Bank’s election not to renew such Letter of Credit.

(e) Letter of Credit Participating Interests. Concurrently with the issuance of each Letter of Credit (and upon the Effective Date, with respect to each Existing Letter of Credit, and without any further action by any party to this Agreement), the respective Issuing Bank automatically shall be deemed, irrevocably and unconditionally, to have sold, assigned, transferred and conveyed to each other Bank, and each other Bank automatically shall be deemed, irrevocably and unconditionally, severally to have purchased, acquired, accepted and assumed from such Issuing Bank, without recourse to, or representation or warranty by, such Issuing Bank, an undivided interest, in a proportion equal to such Bank’s Pro Rata Share, in all of such Issuing Bank’s rights and obligations in, to or under such Letter of Credit, the related Letter of Credit Agreement, all reimbursement obligations with respect to such Letter of Credit, and all collateral, guarantees and other rights from time to time directly or indirectly securing the foregoing (such interest of each Bank being referred to herein as a “Letter of Credit Participating Interest”, it being understood that the Letter of Credit Participating Interest of such Issuing Bank is the interest not otherwise attributable to the Letter of Credit Participating Interests of the other Banks). Each Bank irrevocably and unconditionally agrees to the immediately preceding sentence, such agreement being herein referred to as such Bank’s “Letter of Credit Participating Interest Commitment”. Amounts, other than Letter of Credit Advances made by a Bank other than the Issuing Banks and other than Letter of Credit commissions under Section 2.05(c)(i), payable from time to time under or in connection with a Letter of Credit or Letter of Credit Agreement shall be for the sole account of the Issuing Banks. On the date that any assignee becomes a party to this Agreement in accordance with Section 9.07 hereof, Letter of Credit Participating Interests in all outstanding Letters of Credit held by the Bank from which such assignee acquired its interest hereunder shall be proportionately reallocated between such assignee and such assignor Bank (and, to the extent such assignor Bank is an Issuing Bank, the assignee Bank shall be deemed to have acquired a Letter of Credit Participating Interest from such Issuing Bank to such extent). Notwithstanding any other provision hereof, each Bank hereby agrees that its obligation to participate in each Letter of Credit, its obligation to make the payments specified in Section 2.02(f), and the right of each Issuing Bank to receive such payments in the manner specified therein, are each absolute, irrevocable and unconditional and shall not be affected by any event, condition or circumstance whatever. The failure of any Bank to make any such payment shall not relieve any other Bank of its funding obligation hereunder on the date due, but no Bank shall be responsible for the failure of any other Bank to meet its funding obligations hereunder.

(f) Payment by Banks on Account of Unreimbursed Draws. If an Issuing Bank makes a payment under any Letter of Credit and is not reimbursed in full therefor in accordance with Section 2.03(a), such Issuing Bank may notify the Administrative Agent thereof (which notice may be by telephone), and the Administrative Agent shall forthwith notify each Bank (which notice may be by telephone promptly confirmed in writing) thereof. No later than the Administrative Agent’s close of business on the date such notice is given (if notice is given by 2:00 P.M. Charlotte, North Carolina time) or 10:00 A.M. Charlotte, North Carolina time the

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following day (if notice is given after 2:00 P.M. Charlotte, North Carolina time or in the case of any Bank whose Applicable Lending Office is located in Europe), each Bank will pay to the Administrative Agent, for the account of such Issuing Bank, in immediately available funds, an amount equal to such Bank’s Pro Rata Share of the unreimbursed portion of such payment by such Issuing Bank. Amounts received by the Administrative Agent for the account of such Issuing Bank shall be forthwith transferred, in immediately available funds, to such Issuing Bank. If and to the extent that any Bank fails to make such payment to the Administrative Agent for the account of such Issuing Bank on such date, such Bank shall pay such amount on demand, together with interest, for such Issuing Bank’s own account, for each day from and including the date such payment is due from such Bank to such Issuing Bank to but not including the date of repayment to such Issuing Bank (before and after judgment) at a rate per annum for each day (i) from and including the date such payment is due from such Bank to such Issuing Bank to and including the second Business Day thereafter equal to the Federal Funds Rate and (ii) thereafter equal to the Base Rate. For avoidance of doubt, it is understood and agreed by the Banks that Letters of Credit issued prior to the Expiration Date may, by their terms, remain outstanding after the Expiration Date and that the obligations of the Banks to make payments under this Section 2.02(f) shall continue from and after the Expiration Date until the expiration or termination of all Letters of Credit, subject to and in accordance with the terms hereof.

(g) Letter of Credit Advances. The term “Letter of Credit Advance” is used in this Agreement in accordance with the meanings set forth in this Section 2.02(g). The making of any payment by an Issuing Bank under a Letter of Credit is sometimes referred to herein as the making of a Letter of Credit Advance by such Issuing Bank in the amount of such payment. The making of any payment by a Bank for the account of an Issuing Bank under Section 2.02(f) on account of an unreimbursed drawing on a Letter of Credit is sometimes referred to herein as the making of a Letter of Credit Advance to the Applicable Account Party by such Bank. The making of such a Letter of Credit Advance by a Bank with respect to an unreimbursed drawing on a Letter of Credit shall reduce, by a like amount, the outstanding Letter of Credit Advance of the Issuing Bank with respect to such unreimbursed drawing.

(h) Letter of Credit Reports. Each Issuing Bank will furnish to the Administrative Agent prompt written notice of each issuance or renewal of a Letter of Credit (including the Available Amount and expiration date thereof), amendment to a Letter of Credit, cancellation of a Letter of Credit and payment on a Letter of Credit. The Administrative Agent will furnish (A) to each Bank prior to the fifteenth Business Day of each calendar quarter a written report summarizing issuance, renewal and expiration dates of Letters of Credit issued or renewed during the preceding calendar quarter and payments and reductions in Available Amount during such calendar quarter on all Letters of Credit and (B) to each Bank prior to the fifteenth Business Day of each calendar quarter a written report setting forth the average daily aggregate Available Amount during the preceding calendar quarter of all Letters of Credit.

2.03 Repayment of Advances.

(a) Account Parties’ Reimbursement Obligation.

(i) Each Account Party hereby agrees to reimburse each Issuing Bank (by making payment to the Administrative Agent for the account of each Issuing

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Bank in accordance with Section 2.07) in the amount of each payment made by each Issuing Bank under any Letter of Credit issued for such Account Party’s account, such reimbursement to be made on the date such payment under such Letter of Credit is made by the Issuing Bank (but not earlier than one Business Day after notice of the drawing giving rise to such payment under such Letter of Credit is given to such Account Party). Such reimbursement obligation shall be payable without further notice, protest or demand, all of which are hereby waived, and an action therefor shall immediately accrue. To the extent such payment by such Account Party is not timely made as provided in the first sentence of this clause (i), such Account Party hereby agrees to pay to the Administrative Agent, for the respective accounts of each Issuing Bank and the Banks which have funded their respective shares of such amount remaining unpaid by such Account Party, on demand, interest at a rate per annum equal to the Base Rate plus 2%, for each day from and including the date on which the Applicable Account Party is to reimburse such Issuing Bank to, but excluding, the date such obligation is paid in full.

(ii) The obligation of each Account Party to reimburse each Issuing Bank for any payment made by each Issuing Bank under any Letter of Credit, and the obligation of each Bank under Section 2.02(f) with respect thereto, shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement, the applicable Letter of Credit Agreement and any other applicable agreement or instrument under all circumstances, including, without limitation, the following circumstances:

(A) any lack of validity or enforceability of any Loan Document, any Letter of Credit Agreement, any Letter of Credit or any other agreement or instrument relating thereto (all of the foregoing being, collectively, the “L/C Related Documents”);

(B) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations of any Account Party or any other Person in respect of any L/C Related Document or any other amendment or waiver of or any consent to departure from all or any of the L/C Related Documents;

(C) the existence of any claim, set-off, defense or other right that any Account Party or any other Person may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for which any such beneficiary or any such transferee may be acting), any Issuing Bank or any other Person, whether in connection with the transactions contemplated by the L/C Related Documents or any unrelated transaction;

(D) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in

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any respect or any statement therein being untrue or inaccurate in any respect;

(E) payment by any Issuing Bank under a Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit;

(F) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from the Guaranty or any other guarantee, for all or any of the obligations of any Account Party or any other Person in respect of the L/C Related Documents; or

(G) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Account Party or a guarantor.

(b) Rescission. If any amount received by an Issuing Bank on account of any Letter of Credit Advance shall be avoided, rescinded or otherwise returned or paid over by such Issuing Bank for any reason at any time, whether before or after the termination of this Agreement (or such Issuing Bank believes in good faith that such avoidance, rescission, return or payment is required, whether or not such matter has been adjudicated), each Bank will (except to the extent a corresponding amount received by such Bank on account of its Letter of Credit Advance relating to the same payment on a Letter of Credit has been avoided, rescinded or otherwise returned or paid over by such Bank), promptly upon notice from the Administrative Agent or such Issuing Bank, pay over to the Administrative Agent for the account of such Issuing Bank its Pro Rata Share of such amount, together with its Pro Rata Share of any interest or penalties payable with respect thereto.

2.04 Termination or Reduction of the LC Commitment Amounts. The Parent may, upon at least three Business Days’ notice to the Administrative Agent, terminate in whole or reduce in part the unused portion of the LC Commitment Amounts; provided, however, that each partial reduction (i) shall be in an aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and (ii) shall be made ratably among the Banks in accordance with their LC Commitment Amounts.

2.05 Fees.

(a) Commitment Fee. The Account Parties jointly and severally agree to pay to the Administrative Agent for the account of the Banks a commitment fee, from the Effective Date in the case of each Initial Bank and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Bank in the case of each other Bank until the Expiration Date, payable in arrears quarterly on the last Business Day of each March, June, September and December commencing December 31, 2004 and on the Expiration Date, at the rate of the Applicable Commitment Fee Percentage on the average daily Unused LC Commitment Amount of each Bank during such quarter (or shorter period); provided, however,

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that no commitment fee shall accrue on the LC Commitment Amount of a Defaulting Bank so long as such Bank shall be a Defaulting Bank.

(b) Administrative Agent’s Fees. The Account Parties jointly and severally agree to pay to the Administrative Agent for its own account such fees as may from time to time be agreed between the Parent and the Administrative Agent.

(c) Letter of Credit Fees, Etc.

(i) The Account Parties jointly and severally agree to pay to the Administrative Agent for the account of each Bank a commission, payable in arrears quarterly on the last Business Day of each March, June, September and December commencing December 31, 2004, and on the Expiration Date, on such Bank’s Pro Rata Share of the average daily aggregate Available Amount during such quarter (or shorter period) of all Letters of Credit of each Type outstanding from time to time at the rate equal to the then Applicable Margin with respect to such Type of Letters of Credit.

(ii) The Account Parties jointly and severally agree to pay (x) to Wachovia, in its capacity as an Issuing Bank and for its own account, the facing fee referred to the Fee Letter, on the terms set forth therein, and (y) each Issuing Bank’s customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, relating to letters of credit as are from time to time in effect. With respect to each Existing Letters of Credit, the respective Issuing Bank shall be entitled to receive the fees and other amounts provided for under this Section 2.05(c)(ii) (to the extent not previously paid to such Issuing Bank pursuant to the Existing Reimbursement Agreement or the Bilateral Agreements) as if the Existing Letters of Credit were issued hereunder on the Effective Date.

2.06 Increased Costs, Etc.

(a) If, due to either (i) the introduction of or any change in or in the interpretation of, in each case after the date hereof, any law or regulation or (ii) the compliance with any guideline or request issued after the date hereof from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Bank of agreeing to issue or of issuing or maintaining or participating in Letters of Credit or the making of Letter of Credit Advances (excluding, for purposes of this Section 2.06, any such increased costs resulting from (x) Taxes or Other Taxes (as to which Section 2.08 shall govern) and (y) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Bank is organized or has its Applicable Lending Office or any political subdivision thereof), then the Account Parties jointly and severally agree to pay, from time to time, within five days after demand by such Bank (with a copy of such demand to the Administrative Agent), which demand shall include a statement of the basis for such demand and a calculation in reasonable detail of the amount demanded, to the Administrative Agent for the account of such Bank additional amounts sufficient to compensate such Bank for such increased cost. A certificate as to the amount of

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such increased cost, submitted to the Account Parties by such Bank, shall be conclusive and binding for all purposes, absent manifest error.

(b) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation, in each case after the date hereof, or (ii) the compliance with any guideline or request issued after the date hereof from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the amount of capital required or expected to be maintained by any Bank or any corporation controlling such Bank as a result of or based upon the existence of such Bank’s commitment to lend hereunder and other commitments of such type, then, within five days after demand by such Bank or such corporation (with a copy of such demand to the Administrative Agent), which demand shall include a statement of the basis for such demand and a calculation in reasonable detail of the amount demanded, the Account Parties jointly and severally agree to pay to the Administrative Agent for the account of such Bank, from time to time as specified by such Bank, additional amounts sufficient to compensate such Bank in the light of such circumstances, to the extent that such Bank reasonably determines such increase in capital to be allocable to the existence of such Bank’s commitment to issue or participate in Letters of Credit hereunder or to the issuance or maintenance of or participation in any Letters of Credit. A certificate as to such amounts submitted to the Account Parties by such Bank shall be conclusive and binding for all purposes, absent manifest error.

(c) Each Bank shall promptly notify the Account Parties and the Administrative Agent of any event of which it has actual knowledge which will result in, and will use reasonable commercial efforts available to it (and not, in such Bank’s good faith judgment, otherwise disadvantageous to such Bank) to mitigate or avoid any obligation by the Account Parties to pay any amount pursuant to Section 2.06(a) or 2.06(b) above or pursuant to Section 2.08 (and, if any Bank has given notice of any such event and thereafter such event ceases to exist, such Bank shall promptly so notify the Account Parties and the Administrative Agent). Without limiting the foregoing, each Bank will designate a different Applicable Lending Office if such designation will avoid (or reduce the cost to the Account Parties of) any event described in the preceding sentence and such designation will not, in such Bank’s good faith judgment, be otherwise disadvantageous to such Bank.

(d) Notwithstanding the provisions of Section 2.06(a), 2.06(b) or 2.08 (and without limiting Section 2.06(c) above), if any Bank fails to notify the Account Parties of any event or circumstance that will entitle such Bank to compensation pursuant to Section 2.06(a), 2.06(b) or 2.08 within 120 days after such Bank obtains actual knowledge of such event or circumstance, then such Bank shall not be entitled to compensation from the Account Parties for any amount arising prior to the date which is 120 days before the date on which such Bank notifies the Account Parties of such event or circumstance. For avoidance of doubt, it is noted that the term “Bank” as used in this Section 2.06 and in other Sections of this Agreement includes the Issuing Banks in its capacity as such.

2.07 Payments and Computations.

(a) The Account Parties shall make each payment hereunder irrespective of any right of counterclaim or set-off (except as otherwise provided in Section 2.11), not later than

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11:00 A.M. (Charlotte, North Carolina time) on the day when due, in U.S. dollars, to the Administrative Agent at the Administrative Agent’s Account in same day funds, with payments being received by the Administrative Agent after such time being deemed to have been received on the next succeeding Business Day. The Administrative Agent will promptly thereafter cause like funds to be distributed (i) if such payment by such Account Party is in respect of principal, interest, commitment fees or any other amount then payable hereunder to more than one Bank, to such Banks for the account of their respective Applicable Lending Offices ratably in accordance with the amounts of such respective amount then payable to such Banks and (ii) if such payment by such Account Party is in respect of any amount then payable hereunder to one Bank, to such Bank for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 9.07(d), from and after the effective date of such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder in respect of the interest assigned thereby to the Bank assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.

(b) Each Account Party hereby authorizes each Bank, if an Event of Default under Section 6.01(a) has occurred and is continuing, to charge from time to time against any or all of such Account Party’s accounts with such Bank any amount that resulted in such Event of Default.

(c) All computations of interest on Letter of Credit Advances (and any other amount payable by reference to the Base Rate) when the Base Rate is determined by reference to Wachovia’s prime rate shall be made by the Administrative Agent on the basis of a year of 365 days or, if applicable, 366 days; all other computations of interest, fees and Letter of Credit commissions shall be made by the Administrative Agent on the basis of a year of 360 days. All such computations shall be made for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest, fees or commissions are payable. Each determination by the Administrative Agent of an interest rate, fee or commission hereunder shall be conclusive and binding for all purposes, absent manifest error.

(d) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fee, as the case may be.

2.08 Taxes.

(a) Any and all payments by any Loan Party hereunder shall be made, in accordance with Section 2.07, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank and each Agent, taxes that are imposed on its overall net income by the United States and taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction under the laws of which such Bank or such Agent, as the case may be, is organized or any political subdivision thereof and, in

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the case of each Bank, taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction of such Bank’s Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments hereunder being herein referred to as “Taxes”). If any Loan Party shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or to any Bank or any Agent, (i) the sum payable by such Loan Party shall be increased as may be necessary so that after such Loan Party and the Administrative Agent have made all required deductions (including deductions applicable to additional sums payable under this Section 2.08) such Bank or such Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Loan Party shall make all such deductions and (iii) such Loan Party shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.

(b) In addition, each Loan Party shall pay any present or future stamp, documentary, excise, property or similar taxes, charges or levies that arise from any payment made hereunder or from the execution, delivery or registration of, performance under, or otherwise with respect to, this Agreement or any other Loan Document (herein referred to as “Other Taxes”).

(c) Each Loan Party shall indemnify each Bank and each Agent for and hold them harmless against the full amount of Taxes and Other Taxes, and for the full amount of taxes of any kind imposed by any jurisdiction on amounts payable under this Section 2.08, imposed on or paid by such Bank or such Agent (as the case may be) and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification payment shall be made within 30 days from the date such Bank or such Agent (as the case may be) makes written demand therefor.

(d) Within 30 days after the date of any payment of Taxes, each Loan Party shall furnish to the Administrative Agent, at its address referred to in Section 9.02, the original or a certified copy of a receipt evidencing such payment. In the case of any payment hereunder by or on behalf of a Loan Party through an account or branch outside the United States or by or on behalf of a Loan Party by a payor that is not a United States person, if such Loan Party determines that no Taxes are payable in respect thereof, such Loan Party shall furnish, or shall cause such payor to furnish, to the Administrative Agent, at such address, an opinion of counsel acceptable to the Administrative Agent stating that such payment is exempt from Taxes. For purposes of this Section 2.08(d) or Section 2.08(e), the terms “United States” and “United States person” shall have the meanings specified in Section 7701(a)(9) and 7701(a)(10) of the Internal Revenue Code, respectively.

(e) Each Bank organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Bank or each Issuing Bank, as the case may be, and on the date of the Assignment and Acceptance pursuant to which it becomes a Bank in the case of each other Bank, and from time to time thereafter as requested in writing by the Parent (but only so long thereafter as such Bank remains lawfully able to do so), provide each of the Administrative Agent and the Parent with two original Internal Revenue Service forms W-8BEN or W-8ECI or (in the case of a Bank that has certified in writing to the Administrative Agent that it is not a “bank” as defined in Section

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881(c)(3)(A) of the Internal Revenue Code) form W-8 (and, if such Bank delivers a form W-8, a certificate representing that such Bank is not a “bank” for purposes of Section 881(c)(3)(A) of the Internal Revenue Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of the Parent and is not a controlled foreign corporation related to the Parent (within the meaning of Section 864(d)(4) of the Internal Revenue Code)), as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that such Bank is exempt from or entitled to a reduced rate of United States withholding tax on payments pursuant to this Agreement or, in the case of a Bank providing a form W-8, certifying that such Bank is a foreign corporation, partnership, estate or trust. If the forms provided by a Bank at the time such Bank first becomes a party to this Agreement indicate a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Bank provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such forms; provided, however, that if, at the effective date of the Assignment and Acceptance pursuant to which a Bank becomes a party to this Agreement, the Bank assignor was entitled to payments under Section 2.08(a) in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Bank assignee on such date. If any form or document referred to in this Section 2.08(e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form W-8BEN, W-8ECI or W-8 (and the related certificate described above), that the Bank reasonably considers to be confidential, the Bank shall give notice thereof to the Parent and shall not be obligated to include in such form or document such confidential information.

(f) For any period with respect to which a Bank which may lawfully do so has failed to provide the Parent with the appropriate form described in Section 2.08(e) above (other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided or if such form otherwise is not required under Section 2.08(e) above), such Bank shall not be entitled to indemnification under Sections 2.08(a) or 2.08(c) with respect to Taxes imposed by the United States by reason of such failure; provided, however, that should a Bank become subject to Taxes because of its failure to deliver a form required hereunder, the Parent shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes.

(g) Each Bank represents and warrants to the Account Parties that, as of the date such Bank becomes a party to this Agreement, such Bank is entitled to receive payments hereunder from the Account Parties without deduction or withholding for or on account of any Taxes.

2.09 Sharing of Payments, Etc. If any Bank shall obtain at any time any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise, other than as a result of an assignment pursuant to Section 9.07) (a) on account of obligations due and payable to such Bank hereunder at such time in excess of its ratable share (according to the proportion of (i) the amount of such obligations due and payable to such Bank at such time to (ii) the aggregate amount of the obligations due and payable to all Banks hereunder at such time)

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of payments on account of the obligations due and payable to all Banks hereunder at such time obtained by all the Banks at such time or (b) on account of obligations owing (but not due and payable) to such Bank hereunder at such time in excess of its ratable share (according to the proportion of (i) the amount of such obligations owing to such Bank at such time to (ii) the aggregate amount of the obligations owing (but not due and payable) to all Banks hereunder at such time) of payments on account of the obligations owing (but not due and payable) to all Banks hereunder at such time obtained by all of the Banks at such time, such Bank shall forthwith purchase from the other Banks such interests or participating interests in the obligations due and payable or owing to them, as the case may be, as shall be necessary to cause such purchasing Bank to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Bank, such purchase from each other Bank shall be rescinded and such other Bank shall repay to the purchasing Bank the purchase price to the extent of such Bank’s ratable share (according to the proportion of (i) the purchase price paid to such Bank to (ii) the aggregate purchase price paid to all Banks) of such recovery together with an amount equal to such Bank’s ratable share (according to the proportion of (i) the amount of such other Bank’s required repayment to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. Each Account Party agrees that any Bank so purchasing an interest or participating interest from another Bank pursuant to this Section 2.09 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such interest or participating interest, as the case may be, as fully as if such Bank were the direct creditor of such Account Party in the amount of such interest or participating interest, as the case may be.

2.10 Use of Letters of Credit. The Letters of Credit shall be used for the general corporate purposes of the Account Parties and their respective Subsidiaries.

2.11 Defaulting Banks.

(a) In the event that, at any one time, (i) any Bank shall be a Defaulting Bank, (ii) such Defaulting Bank shall owe a Defaulted Amount to any Agent or any of the other Banks and (iii) any Account Party shall make any payment hereunder or under any other Loan Document to the Administrative Agent for the account of such Defaulting Bank, then the Administrative Agent may, on its behalf or on behalf of such other Banks and to the fullest extent permitted by applicable law, apply at such time the amount so paid by such Account Party to or for the account of such Defaulting Bank to the payment of each such Defaulted Amount to the extent required to pay such Defaulted Amount. In the event that the Administrative Agent shall so apply any such amount to the payment of any such Defaulted Amount on any date, the amount so applied by the Administrative Agent shall constitute for all purposes of this Agreement and the other Loan Documents payment, to such extent, of such Defaulted Amount on such date. Any such amount so applied by the Administrative Agent shall be retained by the Administrative Agent or distributed by the Administrative Agent to such other Banks, ratably in accordance with the respective portions of such Defaulted Amounts payable at such time to the Administrative Agent and such other Banks and, if the amount of such payment made by such Account Party shall at such time be insufficient to pay all Defaulted Amounts owing at such time to the Administrative Agent, such other Agents and such other Banks, in the following order of priority:

(i) first, to the Agents for any Defaulted Amounts then owing to the Agents;

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(ii) second, to the Issuing Banks for any amount then due and payable to them, in their capacity as such, by such Defaulting Bank, ratably in accordance with such amounts then due and payable to the Issuing Banks; and

(iii) third, to any other Banks for any Defaulted Amounts then owing to such other Banks, ratably in accordance with such respective Defaulted Amounts then owing to such other Banks.

Any portion of such amount paid by such Account Party for the account of such Defaulting Bank remaining, after giving effect to the amount applied by the Administrative Agent pursuant to this Section 2.11(a), shall be applied by the Administrative Agent as specified in Section 2.11(b).

(b) In the event that, at any one time, (i) any Bank shall be a Defaulting Bank, (ii) such Defaulting Bank shall not owe a Defaulted Amount and (iii) any Account Party, any Agent or other Bank shall be required to pay or distribute any amount hereunder or under any other Loan Document to or for the account of such Defaulting Bank, then such Account Party or such Agent or such other Bank shall pay such amount to the Administrative Agent to be held by the Administrative Agent, to the fullest extent permitted by applicable law, in escrow and the Administrative Agent shall, to the fullest extent permitted by applicable law, hold in escrow such amount otherwise held by it. Any funds held by the Administrative Agent in escrow under this Section 2.11(b) shall be deposited by the Administrative Agent in an account with Wachovia in the name and under the control of the Administrative Agent, but subject to the provisions of this Section 2.11(b). The terms applicable to such account, including the rate of interest payable with respect to the credit balance of such account from time to time, shall be Wachovia’s standard terms applicable to escrow accounts maintained with it. Any interest credited to such account from time to time shall be held by the Administrative Agent in escrow under, and applied by the Administrative Agent from time to time in accordance with the provisions of, this Section 2.11(b). The Administrative Agent shall, to the fullest extent permitted by applicable law, apply all funds so held in escrow from time to time to the extent necessary to make any Advances required to be made by such Defaulting Bank and to pay any amount payable by such Defaulting Bank hereunder and under the other Loan Documents to the Administrative Agent or any other Bank, as and when such Advances or amounts are required to be made or paid and, if the amount so held in escrow shall at any time be insufficient to make and pay all such Advances and amounts required to be made or paid at such time, in the following order of priority:

(i) first, to the Agents for any amounts then due and payable by such Defaulting Bank to the Agents hereunder;

(ii) second, to the Issuing Banks for any amount then due and payable to them, in their capacity as such, by such Defaulting Bank, ratably in accordance with such amounts then due and payable to such Issuing Banks; and

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(iii) third, to any other Banks for any amount then due and payable by such Defaulting Bank to such other Banks hereunder, ratably in accordance with such respective amounts then due and payable to such other Banks.

In the event that any Bank that is a Defaulting Bank shall, at any time, cease to be a Defaulting Bank, any funds held by the Administrative Agent in escrow at such time with respect to such Bank shall be distributed by the Administrative Agent to such Bank and applied by such Bank to the obligations owing to such Bank at such time under this Agreement and the other Loan Documents ratably in accordance with the respective amounts of such obligations outstanding at such time.

(c) The rights and remedies against a Defaulting Bank under this Section 2.11 are in addition to other rights and remedies that any Agent or any Bank may have against such Defaulting Bank with respect to any Defaulted Amount.

2.12 Replacement of Affected Bank. At any time any Bank is an Affected Bank, the Account Parties may replace such Affected Bank as a party to this Agreement with one or more other Banks and/or Eligible Assignees, and upon notice from the Account Parties such Affected Bank shall assign pursuant to an Assignment and Acceptance, and without recourse or warranty, its LC Commitment Amount, its Letter of Credit Advances, its obligations to fund Letter of Credit payments, its participation in, and its rights and obligations with respect to, Letters of Credit, and all of its other rights and obligations hereunder to such other Banks and/or Eligible Assignees for a purchase price equal to the sum of the principal amount of the Letter of Credit Advances so assigned, all accrued and unpaid interest thereon, such Affected Bank’s ratable share of all accrued and unpaid fees payable pursuant to Section 2.05 and all other obligations owed to such Affected Bank hereunder.

2.13 Certain Provisions Relating to the Issuing Banks and Letters of Credit.

(a) Letter of Credit Agreements. The representations, warranties and covenants by the Account Parties under, and the rights and remedies of each Issuing Bank under, any Letter of Credit Agreement relating to any Letter of Credit are in addition to, and not in limitation or derogation of, representations, warranties and covenants by the Account Parties under, and rights and remedies of each Issuing Bank and the Banks under, this Agreement and applicable law. Each Account Party acknowledges and agrees that all rights of each Issuing Bank under any Letter of Credit Agreement shall inure to the benefit of each Bank to the extent of its Letter of Credit Participating Interest Commitment and Letter of Credit Advances as fully as if such Bank was a party to such Letter of Credit Agreement. In the event of any inconsistency between the terms of this Agreement and any Letter of Credit Agreement, this Agreement shall prevail.

(b) Certain Provisions. The Issuing Banks shall have no duties or responsibilities to any Agent or any Bank except those expressly set forth in this Agreement, and no implied duties or responsibilities on the part of the Issuing Banks shall be read into this Agreement or shall otherwise exist. The duties and responsibilities of the Issuing Banks to the Banks and the Agents under this Agreement and the other Loan Documents shall be mechanical and administrative in nature, and the Issuing Banks shall not have a fiduciary relationship in respect of any Agent, any Bank or any other Person. No Issuing Bank shall be liable for any action taken or omitted to be

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taken by it under or in connection with this Agreement or any Loan Document or Letter of Credit, except to the extent resulting from its gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction. The Issuing Banks shall not be under any obligation to ascertain, inquire or give any notice to any Agent or any Bank relating to (i) the performance or observance of any of the terms or conditions of this Agreement or any other Loan Document on the part of any Account Party, (ii) the business, operations, condition (financial or otherwise) or prospects of the Account Parties or any other Person, or (iii) the existence of any Default. The Issuing Banks shall not be under any obligation, either initially or on a continuing basis, to provide any Agent or any Bank with any notices, reports or information of any nature, whether in its possession presently or hereafter, except for such notices, reports and other information expressly required by this Agreement to be so furnished. The Issuing Banks shall not be responsible for the execution, delivery, effectiveness, enforceability, genuineness, validity or adequacy of this Agreement or any Loan Document.

(c) Administration. Each Issuing Bank may rely upon any notice or other communication of any nature (written, electronic or oral, including but not limited to telephone conversations and transmissions through each Issuing Bank’s remote access system, whether or not such notice or other communication is made in a manner permitted or required by this Agreement or any other Loan Document) purportedly made by or on behalf of the proper party or parties, and each Issuing Bank shall not have any duty to verify the identity or authority of any Person giving such notice or other communication. Each Issuing Bank may consult with legal counsel (including, without limitation, its in-house counsel or in-house or other counsel for the Account Parties), independent public accountants and any other experts selected by it from time to time, and each Issuing Bank shall not be liable for any action taken or omitted to be taken in good faith in accordance with the advice of such counsel, accountants or experts. Whenever an Issuing Bank shall deem it necessary or desirable that a matter be proved or established with respect to any Account Party, any Agent or any Bank, such matter may be established by a certificate of such Account Party, such Agent or such Bank, as the case may be, and such Issuing Bank may conclusively rely upon such certificate. An Issuing Bank shall not be deemed to have any knowledge or notice of the occurrence of any Default unless such Issuing Bank has received notice from a Bank, an Agent or an Account Party referring to this Agreement, describing such Default, and stating that such notice is a “notice of default”.

(d) Indemnification of Issuing Banks by Banks. Each Bank hereby agrees to reimburse and indemnify each Issuing Bank and each of its directors, officers, employees and agents (to the extent not reimbursed by the Account Parties and without limitation of the obligations of the Account Parties to do so), in accordance with its Pro Rata Share, from and against any and all amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature (including, without limitation, the reasonable fees and disbursements of counsel (other than in-house counsel) for each Issuing Bank or such other Person in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not each Issuing Bank or such other Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against each Issuing Bank, in its capacity as such, or such other Person, as a result of, or arising out of, or in any way related to or by reason of, this Agreement, any other Loan Document or any Letter of Credit, any transaction from time to time contemplated hereby or thereby, or any transaction financed in whole or in part or directly or indirectly with the proceeds

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of any Letter of Credit, provided, that no Bank shall be liable for any portion of such amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements to the extent resulting from the gross negligence or willful misconduct of an Issuing Bank or such other Person, as finally determined by a court of competent jurisdiction.

(e) Issuing Banks in their Individual Capacity. With respect to its commitments and the obligations owing to it, each Issuing Bank shall have the same rights and powers under this Agreement and each other Loan Document as any other Bank and may exercise the same as though it were not an Issuing Bank, and the term “Banks” and like terms shall include each Issuing Bank in its individual capacity as such. Each Issuing Bank and its affiliates may, without liability to account to any Person, make loans to, accept deposits from, acquire debt or equity interests in, act as trustee under indentures of, act as agent under other credit facilities for, and engage in any other business with, any Account Party and any stockholder, subsidiary or affiliate of any Account Party, as though such Issuing Bank were not an Issuing Bank hereunder.

2.14 Downgrade Event with Respect to a Bank.

(a) If a Downgrade Event shall occur with respect to (i) any Downgraded Bank or (ii) any other Bank and, as a result thereof, such other Bank becomes a Downgraded Bank, then the Administrative Agent may, by notice to such Downgraded Bank and the Parent within 45 days after such Downgrade Event (any such notice, a “Downgrade Notice”), request that the Account Parties use reasonable efforts to replace such Bank as a party to this Agreement pursuant to Section 2.12. If such Bank is not so replaced within 45 days after receipt by the Account Parties of such Downgrade Notice, then (x) if no Default exists and such Downgraded Bank has not exercised its right to remain a Bank hereunder pursuant to clause (y) below, the following shall occur concurrently:

(i) the Committed Facility shall be reduced by the amount of the LC Commitment Amount of such Downgraded Bank,

(ii) the Account Parties shall prepay all amounts owed to such Downgraded Bank hereunder or in connection herewith,

(iii) if, upon the reduction of the Committed Facility under clause (i) above and the payment under clause (ii) above, the sum of the principal amount of all Advances plus the Available Amount of all Letters of Credit (valuing the Available Amount of, and Letter of Credit Advances of the Issuing Banks in respect of, any Non-Dollar Letter of Credit at the Dollar Equivalent thereof as of the time of such calculation) would exceed the amount of the Committed Facility, then the Account Parties will immediately eliminate such excess by paying Advances and/or causing the Available Amount of one or more Letters of Credit to be reduced, and

(iv) upon completion of the events described in clauses (i), (ii) and (iii) above, such Downgraded Bank shall cease to be a party to this Agreement;

or (y) if a Default exists or, not later than 30 days after receipt of such Downgrade Notice, such Downgraded Bank notifies the Account Parties, the Issuing Banks and the Administrative Agent

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that such Downgraded Bank elects to provide (in a manner reasonably satisfactory to Administrative Agent) cash collateral to the Administrative Agent for (or if such Downgraded Bank is unable, without regulatory approval, to provide cash collateral, a letter of credit reasonably satisfactory to Administrative Agent covering) its contingent obligations to reimburse each Issuing Bank for any payment under any Letter of Credit as provided in Section 2.02(f) (its “LC Participation Obligations”), such Downgraded Bank shall be obligated to (and each Bank agrees that in such circumstances it will) deliver to the Administrative Agent (I) immediately, cash collateral (or, as aforesaid, a letter of credit) in an amount equal to its LC Participation Obligations and (II) from time to time thereafter (so long as it is a Downgraded Bank), cash collateral (or, as aforesaid, a letter of credit) sufficient to cover any increase in its LC Participation Obligations as a result of any proposed issuance of or increase in a Letter of Credit. Any funds provided by a Downgraded Bank for such purpose shall be maintained in segregated deposit accounts in the name of the Issuing Banks at the Administrative Agent’s principal offices in the United States (each a “Downgrade Account”). The funds so deposited in any Downgrade Account (or any drawing under such a letter of credit) shall be used only in accordance with the following provisions of this Section 2.14.

(b) If any Downgraded Bank shall be required to fund its participation in a payment under a Letter of Credit pursuant to Section 2.02(f), then the Administrative Agent shall apply the funds deposited in the applicable Downgrade Account by such Downgraded Bank (or any drawing under such a letter of credit) to fund such participation. The deposit of funds in a Downgrade Account by any Downgraded Bank (or any drawing under such a letter of credit) shall not constitute a Letter of Credit Advance (and the Downgraded Bank shall not be entitled to interest on such funds except as provided in Section 2.14(c) below) unless and until (and then only to the extent that) such funds (or any drawing under such a letter of credit) are used by the Administrative Agent to fund the participation of such Downgraded Bank pursuant to the first sentence of this Section 2.14(b).

(c) Funds in a Downgrade Account shall be invested in such investments as may be agreed between the Administrative Agent and the applicable Downgraded Bank, and the income from such investments shall be distributed to such Downgraded Bank from time to time (but not less often than monthly) as agreed between the Administrative Agent and such Downgraded Bank. The Administrative Agent will (i) from time to time, upon request by a Downgraded Bank, release to such Downgraded Bank any amount on deposit in the applicable Downgrade Account in excess of the LC Participation Obligations of such Downgraded Bank (or, if applicable, not draw under any such letter of credit in excess of the L/C Participation Obligations of such Downgraded Bank) and (ii) upon the earliest to occur of (A) the effective date of any replacement of such Downgraded Bank as a party hereto pursuant to an Assignment and Acceptance, (B) the termination of such Downgraded Bank’s LC Commitment Amount pursuant to Section 2.14(a) or (C) the first Business Day after receipt by the Administrative Agent of evidence (reasonably satisfactory to the Administrative Agent) that such Bank is no longer a Downgraded Bank, release to such Bank all amounts on deposit in the applicable Downgrade Account (or, if applicable, return such letter of credit to such Bank for cancellation).

(d) At any time any Downgraded Bank is required to maintain cash collateral with the Administrative Agent pursuant to this Section 2.14, the Issuing Banks shall have no obligation to issue or increase any Letter of Credit unless such Downgraded Bank has provided sufficient

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funds as cash collateral to the Administrative Agent to cover all LC Participation Obligations of such Downgraded Bank (including in respect of the Letter of Credit to be issued or increased).

2.15 Non-Dollar Letters of Credit.

(a) The Account Parties, the Administrative Agent, the Issuing Banks and the Banks (i) agree that an Issuing Bank may (in its sole discretion), with the prior approval of the Administrative Agent, issue Letters of Credit (“Non-Dollar Letters of Credit”) in currencies other than U.S. dollars and (ii) further agree as set forth in the following subsections of this Section 2.15 with respect to such Non-Dollar Letters of Credit.

(b) The Account Parties agree that their reimbursement obligations under Section 2.03(a) and any resulting Letter of Credit Advance, in each case in respect of a drawing under any Non-Dollar Letter of Credit, (i) shall be payable in Dollars at the Dollar Equivalent of such obligation in the currency in which such Non-Dollar Letter of Credit was issued (determined on the date of payment by the Account Parties or, in the event of payment by the Banks pursuant to Section 2.02(f), on the date of such payment by the Banks), and (ii) shall bear interest at a rate per annum equal to the Base Rate plus 2%, for each day from and including the date on which the Applicable Account Party is to reimburse an Issuing Bank pursuant to Section 2.03(a) to but excluding the date such obligation is paid in full.

(c) Each Bank agrees that its obligation to pay an Issuing Bank such Bank’s Pro Rata Share of the unreimbursed portion of any payment by such Issuing Bank under Section 2.02(f) in respect of a drawing under any Non-Dollar Letter of Credit shall be payable in Dollars at the Dollar Equivalent of such obligation in the currency in which such Non-Dollar Letter of Credit was issued (calculated on the date of payment), and any such amount which is not paid when due shall bear interest at a rate per annum equal to the Overnight Rate plus, beginning on the third Business Day after such amount was due, 2%.

(d) For purposes of determining whether there is availability for the Account Parties to request any Advance or to request the issuance or extension of, or any increase in, any Letter of Credit, the Dollar Equivalent amount of the Available Amount of each Non-Dollar Letter of Credit shall be calculated as of the date such Advance is to be made or such Letter of Credit is to be issued, extended or increased.

(e) For purposes of determining the letter of credit fee under Section 2.05(c), the Dollar Equivalent amount of the Available Amount of any Non-Dollar Letter of Credit shall be determined on each of (i) the date of an issuance, extension or change in the Available Amount of such Non-Dollar Letter of Credit, (ii) the date of any payment by an Issuing Bank in respect of a drawing under such Non-Dollar Letter of Credit, (iii) the last Business Day of each March, June, September and December and (iv) each day on which the LC Commitment Amounts are to be reduced pursuant to Section 2.04 (it being understood that no requested reduction shall be permitted to the extent that, after making a calculation pursuant to this Section 2.15(e), such reduction would be greater than the unused portion of the LC Commitment Amounts).

(f) If, on the last Business Day of each March, June, September and December, the sum of the principal amount of all Advances plus the Available Amount of all Letters of Credit

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(valuing the Available Amount of, and Letter of Credit Advances in respect of, any Non-Dollar Letter of Credit at the Dollar Equivalent thereof as of such day) would exceed the amount of the Committed Facility, then the Account Parties will immediately eliminate such excess by paying Advances and/or causing the Available Amount of one or more Letters of Credit to be reduced.

(g) If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due in respect of any Non-Dollar Letter of Credit in one currency into another currency, the rate of exchange used shall be that at which, in accordance with its normal banking procedures, Wachovia in its capacity as an Issuing Bank could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given. The obligation of any Account Party in respect of any such sum due from it to any Issuing Bank or any Bank hereunder shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement and the applicable Non-Dollar Letter of Credit (the “Agreement Currency”), be discharged only to the extent that on the Business Day following receipt by such Issuing Bank or such Bank of any sum adjudged to be so due in the Judgment Currency, such Issuing Bank or such Bank may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency. If the amount of the Agreement Currency so purchased is less than the sum originally due to such Issuing Bank or such Bank in the Agreement Currency, the Applicable Account Party agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Issuing Bank or such Bank, as applicable, against such loss. If the amount of the Agreement Currency so purchased is greater than the sum originally due to such Issuing Bank or such Bank in such currency, each Issuing Bank and each Bank agrees to return the amount of any excess to the Applicable Account Party (or to any other Person who may be entitled thereto under applicable law).

(h) For purposes of this Section 2.15, “Dollar Equivalent” means, in relation to an amount denominated in a currency other than U.S. dollars, the amount of U.S. dollars which could be purchased with such amount by Wachovia in its capacity as an Issuing Bank in accordance with its customary procedures (and giving effect to any transaction costs) at the quoted foreign exchange spot rate of Wachovia in its capacity as an Issuing Bank at the time of determination; and “Overnight Rate” means, for any day, the rate of interest per annum at which overnight deposits in the applicable currency, in an amount approximately equal to the amount with respect to which such rate is being determined, would be offered for such day by Wachovia in its capacity as an Issuing Bank to major banks in the London or other applicable offshore interbank market. The Overnight Rate for any day which is not a Business Day (or on which dealings are not carried on in the applicable offshore interbank market) shall be the Overnight Rate for the immediately preceding Business Day.

2.16 Increase of LC Commitment Amounts.

(a) From time to time subsequent to the Effective Date, the Account Parties jointly may, upon at least five days’ notice to the Administrative Agent (which shall promptly provide a copy of such notice to the Banks), propose to increase the aggregate amount of the LC Commitment Amounts by an amount which (i) is not less than $25,000,000, or an integral multiple of $1,000,000 in excess thereof, with respect to any such request nor (ii) when aggregated with all prior increases in the LC Commitment Amounts pursuant to this

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Section 2.16, is not in excess of $250,000,000. The Borrowers may increase the aggregate LC Commitment Amounts by (i) agreeing with any Bank to increase its LC Commitment Amount hereunder, (ii) having another bank or other banks reasonably satisfactory to the Administrative Agent (each, an “Additional Bank”) become party to this Agreement or (iii) a combination of the procedures described in clauses (i) and (ii) of this sentence.

(b) An increase in the aggregate amount of the LC Commitment Amounts pursuant to this Section 2.16 shall become effective upon the receipt by the Administrative Agent of an agreement in form and substance satisfactory to the Administrative Agent signed by the Account Parties, by each Additional Bank and by each other Bank whose LC Commitment Amount is to be increased, setting forth the new LC Commitment Amounts of such Banks and setting forth the agreement of each Additional Bank to become a party to this Agreement and to be bound by all the terms and provisions hereof, together with such evidence of appropriate corporate authorization on the part of the Account Parties with respect thereto and such opinions of counsel for the Account Parties with respect thereto as the Administrative Agent may reasonably request. At the time of any increase in the aggregate LC Commitment Amount pursuant to this Section 2.16, the Account Parties shall represent (i) that, immediately before and after such increase is made, no Default has occurred and is continuing and (ii) that the representations and warranties of the Account Parties contained in the Loan Documents are true in all material respects on and as of the date such increase is made, except for such representations or warranties which by their terms are made as of a specified date, which shall be true and correct as of such specified date.

ARTICLE III

CONDITIONS OF LENDING AND ISSUANCES OF LETTERS OF CREDIT

3.01 Conditions Precedent to Effective Date. The occurrence of the Effective Date, and the obligation of the Issuing Banks to issue any Letter of Credit on the Effective Date, is subject to the satisfaction of the following conditions precedent:

(a) The Administrative Agent shall have received the following, each dated the Effective Date (unless otherwise specified), in form and substance reasonably satisfactory to the Administrative Agent (unless otherwise specified) and in sufficient copies for each Bank:

(i) Certified copies of the resolutions of the Board of Directors of each Loan Party approving the transactions contemplated by the Loan Documents and each Loan Document to which it is or is to be a party, and of all documents evidencing other necessary corporate action and governmental and other third party approvals and consents, if any, with transactions contemplated by the Loan Documents and each Loan Document to which it is or is to be a party.

(ii) A copy of a certificate of the Secretary of State or other appropriate official of the jurisdiction of incorporation of each Loan Party, dated reasonably near the Effective Date, certifying as to the good standing (or existence) of such Loan Party.

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(iii) A certificate of each Loan Party, signed on behalf of such Loan Party by its President or a Vice President (or equivalent officer if such Loan Party has no Vice President) and its Secretary or any Assistant Secretary (the statements made in which certificate shall be true on and as of the Effective Date), certifying as to (1) a true and correct copy of the constitutional documents of such Loan Party as in effect on the date on which the resolutions referred to in Section 3.01(a)(i) were adopted and on the Effective Date, (2) the due incorporation and good standing or valid existence of such Loan Party as a corporation organized under the laws of the jurisdiction of its incorporation, and the absence of any proceeding for the dissolution or liquidation of such Loan Party, (3) the truth of the representations and warranties contained in the Loan Documents as though made on and as of the Effective Date and (4) the absence of any event occurring and continuing, or resulting from the Effective Date, that constitutes a Default.

(iv) A certificate of the Secretary or an Assistant Secretary of each Loan Party certifying the names and true signatures of the officers of such Loan Party authorized to sign each Loan Document to which it is or is to be a party and the other documents to be delivered hereunder and thereunder.

(v) Favorable opinions of (1) Maples and Calder, Cayman Islands counsel for the Parent, in substantially the form of Exhibit B-1 hereto and as to such other matters as any Bank through the Administrative Agent may reasonably request, (2) Mayer, Brown, Rowe & Maw LLP, New York counsel for the Loan Parties, in substantially the form of Exhibit B-2 hereto and as to such other matters as any Bank through the Administrative Agent may reasonably request, and (3) Conyers Dill & Pearman, Bermuda counsel for ACE Bermuda, Tempest Life and Tempest, in substantially the form of Exhibit B-3 hereto and as to such other matters as any Bank through the Administrative Agent may reasonably request.

(b) There shall exist no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries pending or threatened before any court, governmental agency or arbitrator that (x) would be reasonably expected to have a Material Adverse Effect or (y) would reasonably be expected to materially adversely affect the legality, validity or enforceability of any Loan Document or the other transactions contemplated by the Loan Documents.

(c) No development or change shall have occurred after December 31, 2003, and no information shall have become known after such date, that has had or would reasonably be expected to have a Material Adverse Effect.

(d) The Account Parties shall have paid all accrued fees of the Administrative Agent and the Banks and all accrued expenses of the Administrative Agent (including the accrued fees and expenses of counsel to the Administrative Agent and local counsel on behalf of all of the Banks), in each case to the extent then due and payable.

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(e) The Administrative Agent shall have received evidence satisfactory to it that all obligations of any Account Party outstanding under the Existing Reimbursement Agreement and Existing Secured Reimbursement Agreement (other than fees and expenses of Wachovia’s counsel) and the Bilateral Agreements have been repaid and satisfied in full.

3.02 Conditions Precedent to Each Issuance, Extension or Increase of a Letter of Credit. The obligation of the Issuing Banks to issue, extend or increase a Letter of Credit (including any issuance on the Effective Date) shall be subject to the further conditions precedent that on the date of such issuance, extension or increase (a) the following statements shall be true (and each request for issuance, extension, or increase, and the acceptance by the Account Party that requested such issuance, extension or increase shall constitute a representation and warranty by such Account Party that both on the date of such notice and on the date of such issuance, extension or increase such statements are true):

(i) the representations and warranties contained in each Loan Document are correct in all material respects on and as of such date, before and after giving effect to such issuance, extension or increase, as though made on and as of such date, other than any such representations or warranties that, by their terms, refer to a specific date other the date of such issuance, extension or increase, in which case as of such specific date (provided, however, that the representation and warranty contained in the last sentence of Section 4.01(g) shall be excluded from this clause (i) at all times after (but shall be included on and as of) the Effective Date); and

(ii) no Default has occurred and is continuing, or would result from such issuance, extension or increase;

and (b) the Administrative Agent shall have received such other approvals, opinions or documents as any Bank or any Issuing Bank through the Administrative Agent may reasonably request.

3.03 Determinations Under Section 3.01. For purposes of determining compliance with the conditions specified in Section 3.01, each Bank shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Banks unless an officer of the Administrative Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from such Bank prior to the Effective Date specifying its objection thereto, provided that such Bank has been given at least one Business Day’s notice that the final form of such document or matter is available for its review.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES

4.01 Representations and Warranties of the Account Parties. Each Account Party represents and warrants as follows:

(a) Each Loan Party and each of its Material Subsidiaries (i) is duly organized or formed, validly existing and, to the extent such concept applies, in good standing under the laws of the jurisdiction of its incorporation or formation, (ii) is duly qualified and in good standing as a foreign corporation or other entity in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed would not be reasonably likely to have a Material Adverse Effect and (iii) has all requisite power and authority (including, without limitation, all governmental licenses, permits and other approvals) to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted, except where the failure to have any license, permit or other approval would not be reasonably likely to have a Material Adverse Effect. All of the outstanding Equity Interests in each Account Party (other than the Parent) have been validly issued, are fully paid and non-assessable and (except for any Preferred Securities issued after the date of this Agreement) are owned, directly or indirectly, by the Parent free and clear of all Liens.

(b) Set forth on Schedule 4.01(b) hereto is a complete and accurate list of all Subsidiaries of each Loan Party as of the Effective Date.

(c) The execution, delivery and performance by each Loan Party of each Loan Document to which it is or is to be a party and the consummation of the transactions contemplated by the Loan Documents, are within such Loan Party’s corporate powers, have been duly authorized by all necessary corporate action, and do not (i) contravene such Loan Party’s constitutional documents, (ii) violate any law, rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties or (iv) except for the Liens created under the Loan Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. No Loan Party or any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, the violation or breach of which would be reasonably likely to have a Material Adverse Effect.

(d) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by any Loan Party of any Loan Document to which it is or is to be a party or the other transactions contemplated by the Loan Documents, or (ii) the exercise by the Administrative Agent or any Bank of its rights under the Loan Documents, except for the authorizations, approvals, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect, subject to bankruptcy, insolvency and similar laws of general application relating to creditors’ rights and to general principles of equity.

(e) This Agreement has been, and each other Loan Document when delivered hereunder will have been, duly executed and delivered by each Loan Party party thereto. This

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Agreement is, and each other Loan Document when delivered hereunder will be, the legal, valid and binding obligation of each Loan Party party thereto, enforceable against such Loan Party in accordance with its terms.

(f) There is no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries, including any Environmental Action, pending or, to such Loan Party’s knowledge, threatened before any court, governmental agency or arbitrator that (i) would be reasonably likely to have a Material Adverse Effect or (ii) would reasonably be expected to affect the legality, validity or enforceability of any Loan Document or the transactions contemplated by the Loan Documents.

(g) The Consolidated balance sheet of the Parent and its Subsidiaries as at December 31, 2003, and the related Consolidated statements of income and of cash flows of the Parent and its Subsidiaries for the fiscal year then ended, accompanied by an unqualified opinion of PricewaterhouseCoopers LLP, independent public accountants, and the Consolidated balance sheet of the Parent and its Subsidiaries as at June 30, 2004, and the related Consolidated statements of income and cash flows of the Parent and its Subsidiaries for the six months then ended, duly certified by the Chief Financial Officer of the Parent, copies of which have been furnished to each Bank, fairly present, subject, in the case of said balance sheet as at June 30, 2004, and said statements of income and cash flows for the six months then ended, to year-end audit adjustments, the Consolidated financial condition of the Parent and its Subsidiaries as at such dates and the Consolidated results of operations of the Parent and its Subsidiaries for the periods ended on such dates, all in accordance with GAAP applied on a consistent basis (subject, in the case of the June 30, 2004 balance sheet and statements of income and cash flows, to the absence of footnotes). Since December 31, 2003, there has been no Material Adverse Change.

(h) No written information, exhibit or report furnished by or on behalf of any Loan Party to any Agent or any Bank in connection with the negotiation and syndication of the Loan Documents or pursuant to the terms of the Loan Documents contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein not misleading as at the date it was dated (or if not dated, so delivered).

(i) Margin Stock constitutes less than 25% of the value of those assets of any Account Party which are subject to any limitation on sale, pledge or other disposition hereunder.

(j) Neither any Loan Party nor any of its Subsidiaries is an “investment company”, or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company”, as such terms are defined in the Investment Company Act of 1940, as amended. Neither the making of any Advances, nor the issuance of any Letters of Credit, nor the application of the proceeds or repayment thereof by any Account Party, nor the consummation of the other transactions contemplated by the Loan Documents, will violate any provision of such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder.

(k) Each Loan Party is, individually and together with its Subsidiaries, Solvent.

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(l) Except to the extent that any and all events and conditions under clauses (i) through (v) below of this Section 4.01(l) in the aggregate are not reasonably expected to have a Material Adverse Effect:

(i) Neither any Loan Party nor any ERISA Affiliate has incurred or is reasonably expected to incur any Withdrawal Liability to any Multiemployer Plan.

(ii) With respect to each scheme or arrangement mandated by a government other than the United States (a “Foreign Government Scheme or Arrangement”) and with respect to each employee benefit plan that is not subject to United States law maintained or contributed to by any Loan Party or with respect to which any Subsidiary of any Loan Party may have liability under applicable local law (a “Foreign Plan”):

(A) Any employer and employee contributions required by law or by the terms of any Foreign Government Scheme or Arrangement or any Foreign Plan have been made, or, if applicable, accrued, in accordance with normal accounting practices.

(B) The fair market value of the assets of each funded Foreign Plan, the liability of each insurer for any Foreign Plan funded through insurance or the book reserve established for any Foreign Plan, together with any accrued contributions, is sufficient to procure or provide for the accrued benefit obligations, as of the date hereof, with respect to all current and former participants in such Foreign Plan according to the actuarial assumptions and valuations most recently used to account for such obligations in accordance with applicable generally accepted accounting principles.

(C) Each Foreign Plan required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities.

(iii) During the twelve-consecutive-month period to the date of the execution and delivery of this Agreement and prior to the request for any Letter of Credit to be issued hereunder, no steps have been taken to terminate any Pension Plan, no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a lien under section 302(f) of ERISA and no minimum funding waiver has been applied for or is in effect with respect to any Pension Plan. No condition exists or event or transaction has occurred or is reasonably expected to occur with respect to any Pension Plan which could result in any Loan Party or any ERISA Affiliate incurring any material liability, fine or penalty.

(iv) Each Pension Plan is in compliance in all respects with the applicable provisions of ERISA, the Internal Revenue Code and other federal or state laws.

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(v) No assets of any Loan Party are or are deemed under applicable law to be “plan assets” within the meaning of Department of Labor Regulation §2510.3-101.

(m) In the ordinary course of its business, each Account Party reviews the effect of Environmental Laws on the operations and properties of such Account Party and its Subsidiaries, in the course of which it identifies and evaluates associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by law or as a condition of any license, permit or contract, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat, and any actual or potential liabilities to third parties and any related costs and expenses). On the basis of this review, each Account Party has reasonably concluded that such associated liabilities and costs, including the costs of compliance with Environmental Laws, are unlikely to have a Material Adverse Effect. The operations and properties of each Loan Party and each of its Subsidiaries comply in all material respects with all applicable Environmental Laws and Environmental Permits, except for non-compliances which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; Hazardous Materials have not been released, discharged or disposed of on any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries that would reasonably be expected to have a Material Adverse Effect; and there are no Environmental Actions pending or threatened against any Loan Party or its Subsidiaries, and no circumstances exist that could be reasonably likely to form the basis of any such Environmental Action, which (in either case), individually or in the aggregate with all other such pending or threatened actions and circumstances, would reasonably be expected to have a Material Adverse Effect.

(n) Each Loan Party and each of its Subsidiaries has filed, has caused to be filed or has been included in all material federal tax returns and all other material tax returns required to be filed and has paid all taxes shown thereon to be due, together with applicable interest and penalties, except to the extent contested in good faith and by appropriate proceedings (in which case adequate reserves have been established therefor in accordance with GAAP).

(o) Set forth on Schedule II hereto is a list of all letters of credit that were issued (or deemed issued) under the Existing Reimbursement Agreement and that are outstanding as of the Effective Date.

ARTICLE V

COVENANTS OF THE ACCOUNT PARTIES

5.01 Affirmative Covenants. So long as any Advance or any other obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Bank shall have any Letter of Credit Participating Interest Commitment or commitment to issue a Letter of Credit hereunder, each Account Party will:

(a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with Environmental Laws, Environmental Permits, ERISA and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

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(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, all material taxes, assessments and governmental charges or levies imposed upon it or upon its property; provided, however, that neither any Account Party nor any of its Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or levy that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained.

(c) Maintenance of Insurance. Maintain, and cause each of its Material Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Parent or such Material Subsidiary operates (it being understood that the foregoing shall not apply to maintenance of reinsurance or similar matters which shall be solely within the reasonable business judgment of the Parent and its Subsidiaries).

(d) Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each of its Material Subsidiaries to preserve and maintain, its existence, legal structure, legal name, rights (charter and statutory), permits, licenses, approvals, privileges and franchises; provided, however, that (i) the Parent and its Subsidiaries may consummate any merger or amalgamation or consolidation permitted under Section 5.02(c), (ii) no Subsidiary (other than an Account Party) shall be required to preserve and maintain its existence, legal structure, legal names or other rights (charter and statutory) if the Board of Directors of a direct or indirect parent of such Subsidiary has determined that such action is not disadvantageous in any material respect to the Parent, such parent or the Banks, and (iii) neither the Parent nor any of its Subsidiaries shall be required to preserve any right, permit, license, approval, privilege or franchise if the Board of Directors of the Parent or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Parent or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to the Parent, such Subsidiary or the Banks.

(e) Visitation Rights. At any reasonable time and from time to time upon not less than three Business Days prior notice, permit the Administrative Agent (upon request made by any Agent or any Bank), or any agents or representatives thereof, at the expense (so long as no Default has occurred and is continuing) of such Agent or such Bank, as the case may be, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Parent and any of its Subsidiaries, and to discuss the affairs, finances and accounts of the Parent and any of its Subsidiaries with any of their officers or directors and with, so long as a representative of the Parent is present, their independent certified public accountants; provided that neither the Parent nor any of its Subsidiaries shall be required to

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disclose any information that it reasonably determines is entitled to the protection of attorney-client privilege.

(f) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Parent and each such Subsidiary sufficient to permit the preparation of financial statements in accordance with GAAP.

(g) Maintenance of Properties, Etc. Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted, except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect.

(h) Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of their Affiliates (other than any such transactions between Loan Parties or wholly owned Subsidiaries of Loan Parties) on terms that are fair and reasonable and no less favorable than it would obtain in a comparable arm’s-length transaction with a Person not an Affiliate.

(i) Pari Passu Ranking. Ensure that at all times the claims of the Banks, the Issuing Banks and the Agents against it under the Loan Documents will rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for claims which are preferred by any bankruptcy, insolvency, liquidation or other similar laws of general application or are mandatorily preferred by law applying to insurance companies generally.

5.02 Negative Covenants. So long as any Advance or any other obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Bank shall have any Letter of Credit Participating Interest Commitment or commitment to issue a Letter of Credit hereunder, each of the Account Parties will not, at any time:

(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, or assign or permit any of its Subsidiaries to assign, any accounts or other right to receive income, except:

(i) Permitted Liens;

(ii) Liens described on Schedule 5.02(a) hereto;

(iii) purchase money Liens upon any property acquired or held by the Parent or any of its Subsidiaries in the ordinary course of business to secure the purchase price of such property or to secure Debt incurred solely for the purpose of financing the acquisition, construction or improvement of any property to be subject to such Liens, or Liens existing on any property at the time of acquisition or within 180 days following such acquisition (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price), or

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extensions, renewals or replacements of any of the foregoing for the same or a lesser amount; provided, however, that no such Lien shall extend to or cover any property other than the property being acquired, constructed or improved, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced;

(iv) Liens arising in connection with Capitalized Leases; provided that no such Lien shall extend to or cover any assets other than the assets subject to such Capitalized Leases;

(v) (A) any Lien existing on any asset of any Person at the time such Person becomes a Subsidiary and not created in contemplation of such event, (B) any Lien on any asset of any Person existing at the time such Person is merged or consolidated with or into the Parent or any of it Subsidiaries in accordance with Section 5.02(c) and not created in contemplation of such event and (C) any Lien existing on any asset prior to the acquisition thereof by the Parent or any of its Subsidiaries and not created in contemplation of such acquisition;

(vi) Liens securing obligations under credit default swap transactions determined by reference to, or Contingent Obligations in respect of, Debt issued by the Parent or one of its Subsidiaries; such Debt not to exceed an aggregate principal amount of $550,000,000;

(vii) Liens arising in the ordinary course of its business which (A) do not secure Debt and (B) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business;

(viii) Liens on cash and Approved Investments securing Hedge Agreements arising in the ordinary course of business;

(ix) other Liens securing Debt or other obligations outstanding in an aggregate principal or face amount not to exceed at any time 5% of Consolidated Net Worth;

(x) Liens consisting of deposits made by the Parent or any insurance Subsidiary with any insurance regulatory authority or other statutory Liens or Liens or claims imposed or required by applicable insurance law or regulation against the assets of the Parent or any insurance Subsidiary, in each case in favor of policyholders of the Parent or such insurance Subsidiary or an insurance regulatory authority and in the ordinary course of the Parent’s or such insurance Subsidiary’s business;

(xi) Liens on Investments and cash balances of the Parent or any insurance Subsidiary (other than capital stock of any Subsidiary) securing obligations of the Parent or any insurance Subsidiary in respect of (i) letters of credit obtained in the ordinary course of business and/or (ii) trust arrangements

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formed in the ordinary course of business for the benefit of cedents to secure reinsurance recoverables owed to them by the Parent or any insurance Subsidiary;

(xii) the replacement, extension or renewal of any Lien permitted by clause (ii) or (v) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal (without increase in the amount (other than in respect of fees, expenses and premiums, if any) or change in any direct or contingent obligor) of the Debt secured thereby;

(xiii) Liens securing obligations owed by any Loan Party to any other Loan Party or owed by any Subsidiary of the Parent (other than a Loan Party) to the Parent or any other Subsidiary;

(xiv) Liens incurred in the ordinary course of business in favor of financial intermediaries and clearing agents pending clearance of payments for investment or in the nature of set-off, banker’s lien or similar rights as to deposit accounts or other funds;

(xv) judgment or judicial attachment Liens, provided that the enforcement of such Liens is effectively stayed;

(xvi) Liens arising in connection with Securitization Transactions; provided that the aggregate principal amount of the investment or claim held at any time by all purchasers, assignees or other transferees of (or of interests in) receivables and other rights to payment in all Securitization Transactions (together with the aggregate principal amount of any other obligations secured by such Liens) shall not exceed U.S. $750,000,000;

(xvii) Liens on securities arising out of repurchase agreements with a term of not more than three months entered into with “Lenders” (as such term is defined in the JPMorgan Credit Agreement) or their Affiliates or with securities dealers of recognized standing; provided that the aggregate amount of all assets of the Parent and its Subsidiaries subject to such agreements shall not at any time exceed $1,000,000,000. For purposes of this clause (xvii), “JPMorgan Credit Agreement” shall mean the Three-Year Credit Agreement dated as of April 2, 2004 among the Parent, ACE Bermuda, Tempest, and ACE INA Holdings Inc., as borrowers, various financial institutions, and JPMorgan Chase Bank, as administrative agent, as amended, modified, supplemented or restated from time to time; and

(xviii) Liens securing up to an aggregate amount of $200,000,000 of obligations of the Parent or any wholly owned Subsidiary, arising out of catastrophe bond financing.

(b) Change in Nature of Business. Make any material change in the nature of the business of the Parent and its Material Subsidiaries, taken as a whole, as carried on at the date hereof.

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(c) Mergers, Etc. Merge into or amalgamate or consolidate with any Person or permit any Person to merge into it, or permit any of its Subsidiaries to do so, except that:

(i) any Subsidiary of the Parent may merge into or amalgamate or consolidate with any other Subsidiary of the Parent, provided that, in the case of any such merger, amalgamation or consolidation, the Person formed by such merger, amalgamation or consolidation shall be a wholly owned Subsidiary of the Parent, provided further that, in the case of any such merger, amalgamation or consolidation to which an Account Party is a party, the Person formed by such merger, amalgamation or consolidation shall be such Account Party;

(ii) any Subsidiary of any Account Party may merge into or amalgamate or consolidate with any other Person or permit any other Person to merge into, amalgamate or consolidate with it; provided that the Person surviving such merger, amalgamation or consolidation shall be a wholly owned Subsidiary of the Account Party;

(iii) in connection with any sale or other disposition permitted under Section 5.02(d), any Subsidiary of the Parent may merge into or amalgamate or consolidate with any other Person or permit any other Person to merge into or amalgamate or consolidate with it; and

(iv) the Parent or any Account Party may merge into or amalgamate or consolidate with any other Person; provided that, in the case of any such merger, amalgamation or consolidation, the Person formed by such merger, amalgamation or consolidation shall be the Parent or such Account Party, as the case may be;

provided, however, that in each case, immediately after giving effect thereto, no event shall occur and be continuing that constitutes a Default.

(d) Sales, Etc., of Assets. Sell, lease, transfer or otherwise dispose of, or permit any other Account Party to sell, lease, transfer or otherwise dispose of, all or substantially all of its assets (excluding sales of investment securities in the ordinary course of business).

(e) Restricted Payments. Declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Interests now or hereafter outstanding, return any capital to its stockholders, partners or members (or the equivalent Persons thereof) as such, make any distribution of assets, Equity Interests, obligations or securities to its stockholders, partners or members (or the equivalent Persons thereof) as such or issue or sell any Equity Interests or accept any capital contributions, or permit any of its Subsidiaries to do any of the foregoing, or permit any of its Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value any Equity Interests in the Parent or to issue or sell any Equity Interests therein, if in any case referred to above, a Default shall have occurred and be continuing at the time of such action or would result therefrom.

(f) Accounting Changes. Make or permit, or permit any of its Subsidiaries to make or permit, any change in accounting policies or reporting practices, except as permitted by GAAP.

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5.03 Reporting Requirements. So long as any Advance or any other obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Bank shall have any Letter of Credit Participating Interest Commitment or commitment to issue a Letter of Credit hereunder, the Parent will furnish to the Agents and the Banks:

(a) Default Notice. As soon as possible and in any event within five days after the occurrence of each Default or any event, development or occurrence reasonably likely to have a Material Adverse Effect continuing on the date of such statement, a statement of the chief financial officer of the Parent setting forth details of such Default, event, development or occurrence and the action that the Parent or the applicable Subsidiary has taken and proposes to take with respect thereto.

(b) Annual Financials.

(i) As soon as available and in any event within 90 days after the end of each Fiscal Year (or, if earlier, within five Business Days after such date as the Parent is required to file its annual report on Form 10-K for such Fiscal Year with the Securities and Exchange Commission), a copy of the annual Consolidated audit report for such year for the Parent and its Subsidiaries, including therein a Consolidated balance sheet of the Parent and its Subsidiaries as of the end of such Fiscal Year and Consolidated statements of income and cash flows of the Parent and its Subsidiaries for such Fiscal Year, all reported on in a manner reasonably acceptable to the Securities and Exchange Commission in each case and accompanied by an opinion of PricewaterhouseCoopers LLP or other independent public accountants of recognized standing reasonably acceptable to the Required Banks, together with (i) a certificate of the Chief Financial Officer, Chief Accounting Officer or Chief Compliance Officer of the Parent stating that no Default has occurred and is continuing, or if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Parent has taken a proposes to take with respect thereto, and (ii) a schedule in form reasonably satisfactory to the Administrative Agent of the computations used by the Parent in determining, as of the end of such Fiscal Year, compliance with the covenants contained in Section 5.04.

(ii) As soon as available and in any event within 120 days after the end of each Fiscal Year, a copy of the annual Consolidated audit report for such year for each Subsidiary Guarantor and its Subsidiaries, including therein a Consolidated balance sheet of such Subsidiary Guarantor and its Subsidiaries as of the end of such Fiscal Year and a Consolidated statement of income and a Consolidated statement of cash flows of such Subsidiary Guarantor and its Subsidiaries for such Fiscal Year, in each case accompanied by an opinion acceptable to the Required Banks of PricewaterhouseCoopers LLP or other independent public accountants of recognized standing acceptable to the Required Banks.

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(c) Quarterly Financials. As soon as available and in any event within 45 days after the end of each of the first three quarters of each Fiscal Year (or, if earlier, within five Business Days after such date as the Parent is required to file its quarterly report on Form 10-Q for such fiscal quarter with the Securities and Exchange Commission), Consolidated balance sheets of the Parent and its Subsidiaries as of the end of such quarter and Consolidated statements of income and a Consolidated statement of cash flows of the Parent and its Subsidiaries for the period commencing at the end of the previous fiscal quarter and ending with the end of such fiscal quarter and Consolidated statements of income and a Consolidated statement of cash flows of the Parent and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding date or period of the preceding Fiscal Year, all in reasonable detail and duly certified (subject to the absence of footnotes and normal year-end audit adjustments) by the Chief Financial Officer, Chief Accounting Officer or Chief Compliance Officer of the Parent as having been prepared in accordance with GAAP, together with (i) a certificate of said officer stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Parent has taken and proposes to take with respect thereto and (ii) a schedule in form reasonably satisfactory to the Administrative Agent of the computations used by the Parent in determining compliance with the covenants contained in Section 5.04.

(d) Litigation. Promptly after the commencement thereof, notice of all actions, suits, investigations, litigation and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting any Loan Party or any of its Subsidiaries of the type described in Section 4.01(f).

(e) Securities Reports. Promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports that the Parent sends to its stockholders generally, copies of all regular, periodic and special reports, and all registration statements, that any Loan Party or any of its Subsidiaries files with the Securities and Exchange Commission or any governmental authority that may be substituted therefor, or with any national securities exchange.

(f) ERISA.

(i) ERISA Events. Promptly and in any event within 10 days after any Loan Party or any ERISA Affiliate institutes any steps to terminate any Pension Plan or becomes aware of the institution of any steps or any threat by the PBGC to terminate any Pension Plan, or the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a lien under section 302(f) of ERISA, or the taking of any action with respect to a Pension Plan which could result in the requirement that any Loan Party or any ERISA Affiliate furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan which could result in any Loan Party or any ERISA Affiliate incurring any material liability, fine or penalty, or any material increase in the contingent liability of any Loan Party or any ERISA Affiliate with respect to any post-retirement Welfare Plan benefit, notice thereof and copies of all documentation relating thereto.

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(ii) Plan Annual Reports. Promptly upon request of any Agent or any Bank, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Pension Plan.

(iii) Multiemployer Plan Notices. Promptly and in any event within 15 Business Days after receipt thereof by any Loan Party or any ERISA Affiliate from the sponsor of a Multiemployer Plan, copies of each notice concerning (A) the imposition of Withdrawal Liability by any such Multiemployer Plan, (B) the reorganization or termination, within the meaning of Title IV of ERISA, of any such Multiemployer Plan or (C) the amount of liability incurred, or that may be incurred, by such Loan Party or any ERISA Affiliate in connection with any event described in clause (A) or (B); provided, however, that such notice and documentation shall not be required to be provided (except at the specific request of any Agent or any Bank, in which case such notice and documentation shall be promptly provided following such request) if such condition or event is not reasonably expected to result in any Loan Party or any ERISA Affiliate incurring any material liability, fine, or penalty.

(g) Statutory Statements. As soon as available and in any event within 20 days after submission, each statutory statement of the Loan Parties (or any of them) in the form submitted to the Supervisor of Insurance, the Insurance Division of the Bermuda Monetary Authority.

(h) Regulatory Notices, Etc. Promptly after any Responsible Officer of the Parent obtains knowledge thereof, (i) a copy of any notice from the Bermuda Minister of Finance or the Registrar of Companies or any other person of the revocation, the suspension or the placing of any restriction or condition on the registration as an insurer of any Account Party under the Bermuda Insurance Act 1978 (and related regulations) or of the institution of any proceeding or investigation which could result in any such revocation, suspension or placing of such a restriction or condition, (ii) copies of any correspondence by, to or concerning any Loan Party relating to an investigation conducted by the Bermuda Minister of Finance, whether pursuant to Section 132 of the Bermuda Companies Act 1981 (and related regulations) or otherwise and (iii) a copy of any notice of or requesting or otherwise relating to the winding-up or any similar proceeding of or with respect to any Loan Party.

(i) Other Information. Such other information respecting the business, condition (financial or otherwise), operations, performance, properties or prospects of any Loan Party or any of its Subsidiaries as the Administrative Agent, or any Bank through the Administrative Agent, may from time to time reasonably request. Information required to be delivered pursuant to Sections 5.03(b), 5.03(c), and 5.03(e) shall be deemed to have been delivered on the date on which the Parent provides notice to the Administrative Agent that such information has been posted on the Parent’s website on the Internet at the website address listed on the signature pages hereof, at sec.gov/edaux.searches.htm or at another website identified in such notice and accessible by the Banks without charge; provided that (x) such notice may be included in a certificate delivered pursuant to Section 5.03(b)(i)(A) or 5.01(c)(i) and (y) the Parent shall deliver paper copies of the information referred to in Sections 5.03(b), 5.03(c), and 5.03(e) to any Bank which requests such delivery.

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5.04 Financial Covenants. So long as any Advance or any other obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Bank shall have any Letter of Credit Participating Interest Commitment or commitment to issue a Letter of Credit hereunder, the Parent will:

(a) Adjusted Consolidated Debt to Total Capitalization Ratio. Maintain at all times a ratio of Adjusted Consolidated Debt to Total Capitalization of not more than 0.35 to 1.0.

(b) Consolidated Net Worth. Maintain at all times Consolidated Net Worth in an amount not less than the Minimum Amount. For this purpose, the “Minimum Amount” is an amount equal to the sum of (i) the Base Amount plus (ii) (A) 25% of Consolidated Net Income for each fiscal quarter of the Parent, ending on or after the date on which the current Base Amount became effective and before the last day of the current Fiscal Year, for which such Consolidated Net Income is positive and (B) 50% of any increase in Consolidated Net Worth during such period attributable to the issuance of ordinary and preferred shares. The “Base Amount” shall be $6,000,000,000 as of December 31, 2003 and shall be reset on the last day of each Fiscal Year to equal the greater of (x) 70% of Consolidated Net Worth as of the last day of such Fiscal Year and (y) the Minimum Amount in effect immediately prior to such last day.

ARTICLE VI

EVENTS OF DEFAULT

6.01 Events of Default. If any of the following events (“Events of Default”) shall occur and be continuing:

(a) (i) any Account Party shall fail to pay any reimbursement obligation in respect of any Advance made by any Issuing Bank pursuant to a Letter of Credit when and as the same shall become due and payable, or (ii) any Account Party shall fail to make any payment of interest on such Advance or of any other amount payable by such Account Party under any Loan Document, in each case under this clause (ii) within five Business Days after the same becomes due and payable; or

(b) any representation or warranty made by any Loan Party (or any of its officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or

(c) any Account Party shall fail to perform or observe any term, covenant or agreement contained in Section 2.10, 5.01(d) (with respect to the Parent), 5.02, 5.03(a) or 5.04; or

(d) any Account Party shall fail to perform or observe any term, covenant or agreement contained in Section 5.01(e) if such failure shall remain unremedied for five Business Days after written notice thereof shall have been given to such Loan Party by any Agent or any Bank; or

(e) any Loan Party shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such

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failure shall remain unremedied for 30 days after the earlier of the date on which (i) a Responsible Officer becomes aware of such failure or (ii) written notice thereof shall have been given to such Loan Party by any Agent or any Bank; or

(f) the Parent or any of its Subsidiaries shall fail to pay any Material Financial Obligation (but excluding Debt outstanding hereunder) of the Parent or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Material Financial Obligation; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Material Financial Obligation and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Material Financial Obligation or otherwise to cause, or to permit the holder thereof to cause, such Material Financial Obligation to mature; or any such Material Financial Obligation shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Material Financial Obligation shall be required to be made, in each case prior to the stated maturity thereof; or

(g) any Loan Party or any of its Significant Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Loan Party or any of its Significant Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or any substantial part of its property) shall occur; or any Loan Party or any of its Significant Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this Section 6.01(g); or

(h) any judgment or order for the payment of money in excess of $100,000,000 shall be rendered against any Loan Party or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(i) any non-monetary judgment or order shall be rendered against any Loan Party or any of its Subsidiaries that would be reasonably likely to have a Material Adverse Effect, and there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

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(j) any provision in Article VII of this Agreement shall for any reason cease to be valid and binding on or enforceable against any Loan Party (other than as a result of a transaction permitted hereunder), or any such Loan Party shall so state in writing; or

(k) a Change of Control shall occur; or

(l) Any Loan Party or any ERISA Affiliate shall incur or shall be reasonably expected to incur liability in excess of $25,000,000 in the aggregate with respect to any Pension Plan or any Multiemployer Plan in connection with the occurrence of any of the following events or existence of any of the following conditions:

(i) Institution of any steps by any Loan Party, any ERISA Affiliate or any other Person, including, without limitation, the PBGC to terminate a Pension Plan if as a result of such termination a Loan Party or any ERISA Affiliate would reasonably expect to be required to make a contribution to such Pension Plan, or would reasonably expect to incur a liability or obligation; or

(ii) A contribution failure occurs with respect to any Pension Plan sufficient to give rise to a lien under section 302(f) of ERISA; or

(iii) Any condition shall exist or event shall occur with respect to a Pension Plan that is reasonably expected to result in any Loan Party or any ERISA Affiliate being required to furnish a bond or security to the PBGC or such Pension Plan, or incurring a liability or obligation; or

(m) any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability or a default, within the meaning of Section 4219(c)(5) of ERISA, has occurred with respect to such Multiemployer Plan which could cause any Loan Party or any ERISA Affiliate to incur a payment obligation in excess of $25,000,000;

then, and in any such event, the Administrative Agent (i) shall at the request, or may with the consent, of the Required Banks, by notice to the Account Parties, declare the obligation of the Issuing Banks to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate, and/or (ii) shall at the request, or may with the consent, of the Required Banks, by notice to the Account Parties, declare all amounts payable under this Agreement and the other Loan Documents to be forthwith due and payable, whereupon all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Account Parties; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to any Account Party under the federal Bankruptcy Code, (x) the obligation of the Issuing Banks to issue Letters of Credit shall automatically be terminated, (y) all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Account Parties and (z) the obligation of the Account Parties to provide cash collateral under Section 6.02 shall automatically become effective.

6.02 Actions in Respect of the Letters of Credit upon Default. If any Event of Default shall have occurred and be continuing, the Administrative Agent may, or shall at the request of

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the Required Banks, after having taken any of the actions described in Section 6.01(ii) or otherwise, make demand upon the Account Parties to, and forthwith upon such demand the Account Parties will, pay to the Administrative Agent on behalf of the Banks in same day funds at the Administrative Agent’s office designated in such demand, an amount equal to the aggregate Available Amount of all Letters of Credit then outstanding as cash collateral. If at any time during the continuance of an Event of Default the Administrative Agent determines that such funds are subject to any right or claim of any Person other than the Administrative Agent and the Banks or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Account Parties will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional cash collateral, an amount equal to the excess of (a) such aggregate Available Amount over (b) the total amount of funds, if any, that the Administrative Agent determines to be free and clear of any such right and claim. Upon the drawing of any Letter of Credit, such funds shall be applied to reimburse the Issuing Banks or Banks, as applicable, to the extent permitted by applicable law.

ARTICLE VII

THE GUARANTY

7.01 The Guaranty.

(a) Each Account Party hereby jointly and severally, unconditionally, absolutely and irrevocably guarantees the full and punctual payment (whether at stated maturity, upon acceleration or otherwise) of all amounts payable by each of the other Account Parties under the Loan Documents including, without limitation, the principal of and interest (including, to the greatest extent permitted by law, post-petition interest) on reimbursement obligations owing by such other Account Parties pursuant to this Agreement with respect to Letters of Credit and fees, expenses, indemnities or any other obligations, whether now existing or hereafter incurred, created or arising and whether direct or indirect, absolute or contingent, or due or to become due. Upon failure by an Account Party to pay punctually any such amount, each other Account Party agrees to pay forthwith on demand the amount not so paid at the place and in the manner specified in this Agreement.

(b) Each Account Party (other than the Parent), and by its acceptance of this Guaranty, the Administrative Agent and each other Bank, hereby confirms that it is the intention of all such Persons that this Guaranty and the obligations of each Account Party hereunder not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to this Guaranty and the obligations of each Account Party (other than the Parent) hereunder. To effectuate the foregoing intention, the Administrative Agent, the other Banks and the Account Parties hereby irrevocably agree that the obligations of each Account Party (other than the Parent) under this Article VII at any time shall be limited to the maximum amount as will result in the obligations of such Account Party under this Guaranty not constituting a fraudulent transfer or conveyance.

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7.02 Guaranty Unconditional. The obligations of each Account Party under this Article VII shall be unconditional, absolute and irrevocable and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by:

(i) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of any other obligor under any of the Loan Documents, by operation of law or otherwise;

(ii) any modification or amendment of or supplement to any of the Loan Documents;

(iii) any release, non-perfection or invalidity of any direct or indirect security for any obligation of any other obligor under any of the Loan Documents;

(iv) any change in the corporate existence, structure or ownership of any obligor, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting any other obligor or its assets or any resulting release or discharge of any obligation of any other obligor contained in any of the Loan Documents;

(v) the existence of any claim, set-off or other rights which any obligor may have at any time against any other obligor, the Administrative Agent, any Bank or any other corporation or person, whether in connection with any of the Loan Documents or any unrelated transactions, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim;

(vi) any invalidity or unenforceability relating to or against any other obligor for any reason of any of the Loan Documents, or any provision of applicable law or regulation purporting to prohibit the payment by any other obligor of principal interest or any other amount payable under any of the Loan Documents;

(vii) any law, regulation or order of any jurisdiction, or any other event, affecting any term of any obligation of the Banks’ rights with respect thereto; or

(viii) any other act or omission to act or delay of any kind by any obligor, the Administrative Agent, any Bank or any other corporation or person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of or defense to an Account Party’s obligations under this Article VII.

7.03 Discharge Only upon Payment in Full; Reinstatement in Certain Circumstances. Each Account Party’s obligations under this Article VII shall remain in full force and effect until the commitments of the Banks hereunder shall have terminated, no Letters of Credit shall be outstanding and all amounts payable by the other Account Parties under the Loan Documents shall have been paid in full. If at any time any payment of the principal of or interest on any reimbursement obligation or any other amount payable by an Account Party under the Loan

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Documents is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of such Account Party or otherwise, each other Account Party’s obligations under this Article VII with respect to such payment shall be reinstated as though such payment had been due but not made at such time.

7.04 Waiver by the Account Parties. Each Account Party irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any corporation or person against any other obligor or any other corporation or person.

7.05 Subrogation. Each Account Party hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against any other Account Party, or any other insider guarantor that arise from the existence, payment, performance or enforcement of such Account Party’s obligations under or in respect of this Guaranty or any other Loan Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Bank against any other Account Party, any other Loan Party or any other insider guarantor or any collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from any other Account Party, any other Loan Party or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all amounts payable under this Guaranty shall have been paid in full in cash, no Letters of Credit shall be outstanding and the commitments of the Banks hereunder shall have expired or been terminated. If any amount shall be paid to any Account Party in violation of the immediately preceding sentence at any time prior to the latest of (a) the payment in full in cash of all amounts payable under this Guaranty, and (b) the Expiration Date, such amount shall be received and held in trust for the benefit of the Banks, shall be segregated from other property and funds of such Account Party and shall forthwith be paid or delivered to the Administrative Agent in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to all amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents, or to be held as collateral for any amounts payable under this Guaranty thereafter arising. If (i) any Account Party shall make payment to any Bank of all or any amounts payable under this Guaranty, (ii) all amounts payable under this Guaranty shall have been paid in full in cash, and (iii) the Expiration Date shall have occurred, the Banks will, at such Account Party’s request and expense, execute and deliver to such Account Party appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Account Party of an interest in the obligations resulting from such payment made by such Account Party pursuant to this Guaranty.

7.06 Stay of Acceleration. If acceleration of the time for payment of any amount payable by any Account Party under any of the Loan Documents is stayed upon the insolvency, bankruptcy or reorganization of such Account Party, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by the other Account Parties under this Article VII forthwith on demand by the Administrative Agent made at the request of the requisite proportion of the Banks.

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7.07 Continuing Guaranty; Assignments. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the latest of (i) the payment in full in cash of all amounts payable under this Guaranty and (ii) the Expiration Date, (b) be binding upon each Account Party, its successors and assigns and (c) inure to the benefit of and be enforceable by the Banks and their successors, transferees and assigns. Without limiting the generality of clause (c) of the immediately preceding sentence, any Bank may assign or otherwise transfer all or any portion of its rights and obligations under this Agreement (including, without limitation, all or any portion of its Letter of Credit Participating Interest Commitment and the Advances owing to it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Bank herein or otherwise, in each case as and to the extent provided in Section 9.07.

ARTICLE VIII

THE AGENTS

8.01 Authorization and Action. Each Bank (in its capacity as a Bank) hereby appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to such Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by the Loan Documents, no Agent shall be required to exercise any discretion or take any action, but shall be required to act (in the case of the Administrative Agent) or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Banks or all the Banks where unanimity is required, and such instructions shall be binding upon all Banks; provided, however, that no Agent shall be required to take any action that exposes such Agent to personal liability or that is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Bank prompt notice of each notice given to it by any Account Party pursuant to the terms of this Agreement.

8.02 Agents’ Reliance, Etc. Neither any Agent nor any of its respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with the Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, each Agent: (a) may consult with legal counsel (including counsel for any Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (b) makes no warranty or representation to any Bank and shall not be responsible to any Bank for any statements, warranties or representations (whether written or oral) made in or in connection with the Loan Documents; (c) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of any Loan Document on the part of any Loan Party or to inspect the property (including the books and records) of any Loan Party; (d) shall not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; and (e) shall incur no liability under or in respect of any Loan Document by acting upon any notice, consent,

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certificate or other instrument or writing (which may be by telegram or telecopy) reasonably believed by it to be genuine and signed or sent by the proper party or parties.

8.03 Agents and Affiliates. With respect to its LC Commitment Amounts, and the Advances, each Agent shall have the same rights and powers under the Loan Documents as any other Bank and may exercise the same as though it were not an Agent; and the term “Bank” or “Banks” shall, unless otherwise expressly indicated, include each Agent in its individual capacity. Each Agent and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, any Loan Party, any of its Subsidiaries and any Person that may do business with or own securities of any Loan Party or any such Subsidiary, all as if such Agent were not an Agent and without any duty to account therefor to the Banks.

8.04 Bank Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon any Agent or any other Bank and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon any Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.

8.05 Indemnification.

(a) Each Bank severally agrees to indemnify each Agent and its officers, directors, employees, agents, advisors and Affiliates (to the extent not promptly reimbursed by the Account Parties) from and against such Bank’s ratable share (determined as provided below) of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against such Agent or any such other Person in any way relating to or arising out of the Loan Documents or any action taken or omitted by such Agent under the Loan Documents; provided, however, that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent’s or other Person’s gross negligence or willful misconduct. Without limitation of the foregoing, each Bank agrees to reimburse each Agent promptly upon demand for its ratable share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Account Parties under Section 9.04, to the extent that such Agent is not promptly reimbursed for such costs and expenses by the Account Parties.

(b) For purposes of this Section 8.05, the Banks’ respective ratable shares of any amount shall be determined, at any time, according to the sum of (i) the aggregate principal amount of the Advances outstanding at such time and owing to the respective Banks, (ii) their respective Pro Rata Shares of the aggregate Available Amounts of all Letters of Credit outstanding at such time and (iii) their respective Unused LC Commitment Amounts at such time. The failure of any Bank to reimburse any Agent promptly upon demand for its ratable share of any amount required to be paid by the Banks to such Agent as provided herein shall not relieve any other Bank of its obligation hereunder to reimburse such Agent for its ratable share of such amount, but no Bank shall be responsible for the failure of any other Bank to reimburse

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such Agent for such other Bank’s ratable share of such amount. Without prejudice to the survival of any other agreement of any Bank hereunder, the agreement and obligations of each Bank contained in this Section 8.05 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the other Loan Documents.

8.06 Successor Administrative Agent. Any Agent may resign at any time by giving written notice thereof to the Banks and the Parent. Upon any such resignation or removal of the Administrative Agent, the Required Banks shall have the right to appoint a successor Administrative Agent, subject (so long as no Event of Default exists) to the consent of the Parent (which consent shall not be unreasonably withheld). If no successor Administrative Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent’s giving of notice of resignation or the Required Banks’ removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a commercial bank organized under the laws of the United States or of any State thereof and having a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent such successor Administrative Agent shall succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under the Loan Documents. If within 45 days after written notice is given of the retiring Administrative Agent’s resignation or removal under this Section 8.06 no successor Administrative Agent shall have been appointed and shall have accepted such appointment, then on such 45^th day (i) the retiring Administrative Agent’s resignation or removal shall become effective, (ii) the retiring Administrative Agent shall thereupon be discharged from its duties and obligations under the Loan Documents and (iii) the Required Banks shall thereafter perform all duties of the retiring Administrative Agent under the Loan Documents until such time, if any, as the Required Banks appoint a successor Administrative Agent as provided above. After any retiring Agent’s resignation or removal hereunder as Agent shall have become effective, the provisions of this Article VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If Bank of America ceases to be a Bank hereunder, it shall be deemed to have resigned as Syndication Agent and no replacement shall be appointed.

ARTICLE IX

MISCELLANEOUS

9.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Loan Document, nor consent to any departure by any Loan Party therefrom, shall in any event be effective unless the same shall be in writing and signed by Wachovia in its capacity as an Issuing Bank and the Required Banks (and, in the case of an amendment, the Parent), and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall:

(a) unless in writing and signed by all of the Banks (other than any Bank that is, at such time, a Defaulting Bank), do any of the following at any time: (i) waive any of

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the conditions specified in Section 3.01 or, in the case of the Effective Date, Section 3.02, (ii) change the number of Banks or the percentage of (x) the LC Commitment Amounts, (y) the aggregate unpaid principal amount of the Advances or (z) the aggregate Available Amount of outstanding Letters of Credit that, in each case, shall be required for the Banks or any of them to take any action hereunder, (iii) reduce or limit the obligations of any Account Party under Section 7.01 or release such Account Party or otherwise limit such Account Party’s liability with respect to the obligations owing to the Agents and the Banks, (iv) amend this Section 9.01 or any of the definitions herein that would have such effect, (v) extend the Expiration Date, or (vi) limit the liability of any Loan Party under any of the Loan Documents;

(b) unless in writing and signed by each affected Bank, do any of the following at any time: (i) increase the LC Commitment Amounts of the Banks or subject the Banks to any additional obligations, (ii) reduce the principal of, or interest on, any reimbursement obligation or any fees or other amounts payable hereunder, or increase any Bank’s LC Commitment Amount, or (iii) postpone any date fixed for any payment of principal of, or interest on, any reimbursement obligation or any fees or other amounts payable hereunder;

provided further that no amendment, waiver or consent shall, unless in writing and signed by an Agent in addition to the Banks required above to take such action, affect the rights or duties of such Agent under this Agreement or the other Loan Documents and no amendment, waiver or consent shall, unless in writing and signed by an Issuing Bank in addition to the Banks above required to take such action, affect the rights or duties of such Issuing Bank under this Agreement or the other Loan Documents.

9.02 Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telegraphic or telecopy communication) and mailed, telegraphed, telecopied or delivered, if to any Account Party, at its address set forth below on the signature pages hereof; if to any Initial Bank, at its Domestic Lending Office specified opposite its name on Part 2 of Schedule I hereto; if to any other Bank, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Bank; if to Wachovia (in its capacity as Issuing Bank) at its address at 401 Linden Street, Mail Code NC-6034, Winston-Salem, North Carolina 27101, Attn: International Operations — Standby Letter of Credit Department, Telecopy No. (336) 735-0952; and if to the Administrative Agent, at its address at Charlotte Plaza Building, 201 South College Street, 8^th Floor NC0680, Charlotte, North Carolina 28288, Attn: Syndication Agency Services, Telecopy No. (704) 383-0288, with a copy to Mark B. Felker, Managing Director, 301 South College Street, 5^th Floor NC0760, Charlotte, NC 28288, Telecopy No. (704) 383-7611; or, as to any party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall, when mailed, telegraphed or telecopied, be effective when deposited in the mails, delivered to the telegraph company or transmitted by telecopier, respectively, except that notices and communications to the Administrative Agent pursuant to Article II, III or VIII shall not be effective until received by the Administrative Agent. Manual delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of an original executed counterpart thereof.

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9.03 No Waiver; Remedies. No failure on the part of any Bank or any Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

9.04 Costs and Expenses.

(a) Each of the Account Parties agrees to pay on demand (i) all reasonable costs and expenses of the Agents, the Joint Lead Arrangers and Wachovia, in its capacity as an Issuing Bank, in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Documents (including, without limitation, (A) all due diligence, collateral review, syndication, transportation, computer, duplication, appraisal, audit, insurance, consultant, search, filing and recording fees and expenses and (B) the reasonable fees and expenses of a single counsel for the Administrative Agent and Wachovia in its capacity as an Issuing Bank with respect thereto, with respect to advising the Administrative Agent as to its rights and responsibilities, or the perfection, protection or preservation of rights or interests, under the Loan Documents, with respect to negotiations with any Loan Party or with other creditors of any Loan Party or any of its Subsidiaries arising out of any Default or any events or circumstances that may give rise to a Default and with respect to presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding involving creditors’ rights generally and any proceeding ancillary thereto); and (ii) all reasonable costs and expenses of each Agent, each Issuing Bank and each Bank in connection with the enforcement of the Loan Documents, whether in any action, suit or litigation, or any bankruptcy, insolvency or other similar proceeding affecting creditors’ rights generally (including, without limitation, the reasonable fees and expenses of counsel for the Administrative Agent, each Issuing Bank and each Bank with respect thereto).

(b) Each of the Account Parties jointly and severally agrees to indemnify and hold harmless each Agent, each Joint Lead Arranger, each Issuing Bank, each Bank and each of their Affiliates and their respective officers, directors, employees, agents and advisors (each, an “Indemnified Party”) from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) this Agreement, the actual or proposed use of the proceeds of the Advances, the Loan Documents or any of the transactions contemplated thereby, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnified Party or any of its Affiliates. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 9.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, shareholders or creditors or an Indemnified Party or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated by the Loan Documents are consummated. Each of the Account Parties also agrees not to assert any claim against any Agent, any Joint Lead Arranger, any Bank or any of their Affiliates, or any of their respective

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officers, directors, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the credit facilities provided hereunder, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Loan Documents or any of the transactions contemplated by the Loan Documents.

(c) Without prejudice to the survival of any other agreement of any Loan Party hereunder or under any other Loan Document, the agreements and obligations of the Account Parties contained in Section 2.07 and this Section 9.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under any of the other Loan Documents.

9.05 Right of Set-off. Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Administrative Agent to declare amounts owing hereunder to be due and payable pursuant to the provisions of Section 6.01, each Agent and each Bank and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and otherwise apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Agent, such Bank or such Affiliate to or for the credit or the account of any Account Party against any and all of the obligations of such Account Party now or hereafter existing under the Loan Documents, irrespective of whether such Agent or such Bank shall have made any demand under this Agreement and although such obligations may be unmatured. Each Agent and each Bank agrees promptly to notify each Account Party after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Agent and each Bank and their respective Affiliates under this Section 9.05 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Agent, such Bank and their respective Affiliates may have.

9.06 Binding Effect. This Agreement shall become effective when it shall have been executed by each Account Party, each Issuing Bank and each Agent and the Administrative Agent shall have been notified by each Initial Bank that such Initial Bank has executed it and thereafter shall be binding upon and inure to the benefit of each Account Party, each Agent, each Issuing Bank and each Bank and their respective successors and assigns, except that no Account Party shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Banks.

9.07 Assignments and Participations.

(a) Each Bank may, and so long as no Default shall have occurred and be continuing, if demanded by any Account Party (following a demand by such Bank pursuant to Section 2.12) upon at least five Business Days notice to such Bank and the Administrative Agent, will, assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its LC Commitment Amount, its Letter of Credit Participating Interest Commitment and the Letter of Credit Advances owing to it); provided, however, that (i) each such assignment shall be of a uniform, and not a varying,

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percentage of all rights and obligations of such Bank hereunder, except for any non-pro rata assignment made by a Downgraded Bank after a request by the Administrative Agent pursuant to Section 2.14 (and any subsequent non-pro rata assignment of the interest so assigned or by the Downgraded Bank) and any other non-pro rata assignment approved by the Administrative Agent and any Account Party, (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was (x) a Bank or an Affiliate of any Bank, the aggregate amount of the LC Commitment Amounts being assigned to such Eligible Assignee pursuant to such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $1,000,000 unless it is an assignment of the entire amount of such assignor’s LC Commitment Amount, or (y) not a Bank or an Affiliate of any Bank, the aggregate amount of the LC Commitment Amounts being assigned to such Eligible Assignee pursuant to such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $5,000,000 unless it is an assignment of the entire amount of such assignor’s LC Commitment Amount, (iii) each such assignment shall be to an Eligible Assignee, (iv) each assignment made as a result of a demand by any Account Party pursuant to Section 2.12 shall be arranged by such Account Party after consultation with the Administrative Agent and shall be either an assignment of all of the rights and obligations of the assigning Bank under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Bank under this Agreement, (v) no Bank shall be obligated to make any such assignment as a result of a demand by any Account Party pursuant to Section 2.12 unless and until such Bank shall have received one or more payments from either such Account Party or other Eligible Assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances made by such Bank, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Bank under this Agreement, (vi) as a result of such assignment, no Account Party shall be subject to additional amounts under Section 2.06 or 2.08 and (vii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with a processing and recordation fee of $3,500.

(b) Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance, (i) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Bank, hereunder and (ii) the Bank assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (other than its rights under Sections 2.06, 2.08 and 9.04 to the extent any claim thereunder relates to an event arising prior to such assignment and any other rights that are expressly provided hereunder to survive) and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the remaining portion of an assigning Bank’s rights and obligations under this Agreement, such Bank shall cease to be a party hereto).

(c) By executing and delivering an Assignment and Acceptance, each Bank assignor thereunder and each assignee thereunder confirm to and agree with each other and the other parties thereto and hereto as follows: (i) other than as provided in such Assignment and

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Acceptance, such assigning Bank makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; (ii) such assigning Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its obligations under any Loan Document or any other instrument or document furnished pursuant thereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon any Agent, such assigning Bank or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated to such Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Bank.

(d) The Administrative Agent, acting for this purpose (but only for this purpose) as the agent of the Account Parties, shall maintain at its address referred to in Section 9.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Banks and the LC Commitment Amount of, and principal amount of the Advances owing to, each Bank from time to time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Account Parties, the Agents and the Banks shall treat each Person whose name is recorded in the Register as a Bank hereunder for all purposes of this Agreement. The Register shall be available for inspection by any Account Party or any Agent or any Bank at any reasonable time and from time to time upon reasonable prior notice.

(e) Upon its receipt of an Assignment and Acceptance executed by an assigning Bank and an assignee, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit A hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Parent and to the parties to such Assignment and Acceptance.

(f) Each Bank may sell participations to one or more Persons (other than any Loan Party or any of its Affiliates) in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its LC Commitment Amount, its Letter of Credit Participating Interest Commitment and the Advances owing to it; provided, however, that (i) such Bank’s obligations under this Agreement (including, without limitation, its Letter of Credit Participating Interest Commitment) shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations,

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(iii) the Account Parties, the Agents and the other Banks shall continue to deal solely and directly with such Bank in connection with such Bank’s rights and obligations under this Agreement and (iv) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, reimbursement obligations or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, postpone any date fixed for any payment of principal of, or interest on, the reimbursement obligations or any fees or other amounts payable hereunder, in each case to the extent subject to such participation. Each Bank shall, as agent of the Account Parties solely for the purposes of this Section 9.07, record in book entries maintained by such Bank, the name and amount of the participating interest of each Person entitled to receive payments in respect of any participating interests sold pursuant to this Section 9.07.

(g) Any Bank may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.07, disclose to the assignee or participant or proposed assignee or participant any information relating to any Account Party furnished to such Bank by or on behalf of any Account Party; provided, however, that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any Confidential Information received by it from such Bank.

(h) Notwithstanding any other provision set forth in this Agreement, any Bank may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System.

9.08 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of an original executed counterpart of this Agreement.

9.09 No Liability of the Issuing Banks. Each Account Party assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither an Issuing Bank nor any of its officers, directors, employees or agents shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by such Issuing Bank against presentation of documents that do not strictly comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that such Account Party shall have a claim against such Issuing Bank, and such Issuing Bank shall be liable to such Account Party, to the extent of any direct, but not consequential, damages suffered by such Account Party that such Account Party proves were caused by (i) such Issuing Bank’s willful misconduct or gross

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negligence as determined in a final, non-appealable judgment by a court of competent jurisdiction in determining whether documents presented under any Letter of Credit comply with the terms of the Letter of Credit or (ii) such Issuing Bank’s willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit. In furtherance and not in limitation of the foregoing, the Issuing Banks may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary.

9.10 Confidentiality. Neither any Agent nor any Bank shall disclose any Confidential Information to any Person without the consent of the Parent, other than (a) to such Agent’s or such Bank’s Affiliates and their officers, directors, employees, agents and advisors and to actual or prospective Eligible Assignees and participants, and then only on a confidential basis, (b) as required by any law, rule or regulation or judicial process, (c) as requested or required by any state, federal or foreign authority or examiner regulating such Bank or pursuant to any request of any self-regulatory body having or claiming authority to regulate or oversee any aspect of a Bank’s business of that of any of its Affiliates and (d) to any rating agency when required by it, provided that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Confidential Information relating to the Loan Parties received by it from such Bank. Notwithstanding anything herein to the contrary, the information subject to this Section 9.10 shall not include, and the Administrative Agent and each Bank may disclose to any and all Persons, without limitation of any kind, any information with respect to the “tax treatment” and “tax structure” (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby or by any of the other Loan Documents and all materials of any kind (including opinions or other tax analyses) that are provided to the Administrative Agent or such Bank relating to such tax treatment and tax structure (it being understood that this authorization is retroactively effective to the commencement of the first discussions between or among any of the parties regarding the transactions contemplated hereby or by any of the other Loan Documents); provided that with respect to any document or similar item that in either case contains information concerning such tax treatment or tax structure as well as other information, this sentence shall only apply to such portions of the document or similar item that relate to such tax treatment or tax structure.

9.11 Jurisdiction, Etc.

(a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any

67

action or proceeding relating to this Agreement or any of the other Loan Documents in the courts of any jurisdiction.

(b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(c) Each of the Account Parties hereby irrevocably appoints Mayer, Brown, Rowe & Maw LLP, with offices on the Effective Date at 1675 Broadway, New York, New York, 10019, USA as its agent to receive, accept and acknowledge for and on its behalf services of any and all legal process, summons, notices and documents which may be served in any such action or proceeding. If for any reason such agent shall cease to be available to act as such, the Account Parties agree to promptly designate a new agent satisfactory to the Administrative Agent in the Borough of Manhattan, The City of New York, to receive, accept and acknowledge for and on its behalf service of any and all legal process, summons, notices and documents which may be served in any such action or proceeding pursuant to the terms of this Section 9.11. In the event that any Borrower shall fail to designate such new agent, service of process in any such action or proceeding may be made on such Account Party by the mailing of copies thereof by express or overnight mail or courier, postage prepaid, to such Account Party at its address set forth opposite its signature below.

9.12 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

9.13 Waiver of Jury Trial. Each of the Account Parties, the Agents and the Banks irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to any of the Loan Documents, the Advances or the actions of any Agent or any Bank in the negotiation, administration, performance or enforcement thereof.

9.14 Disclosure of Information. Each Account Party agrees and consents to the Administrative Agent’s disclosure of information relating to this transaction to Gold Sheets and other similar bank trade publications. Such information will consist of deal terms and other information customarily found in such publications. The Parent shall have the right to review and approve any such disclosure made by the Administrative Agent before such disclosure is made (such approval not to be unreasonably withheld).

9.15 USA Patriot Act. Each Bank hereby notified the Account Parties that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies each Account Party, which information includes the name and address of such Account Party and other information that will allow such Bank to identify such Account Party in

68

accordance with the Patriot Act. Each Account Party shall provide such information promptly upon request from such Bank.

9.16 Certain Effective Date Matters. By their execution of this Agreement, (i) the Account Parties and the Banks that are parties to the Existing Reimbursement Agreement (which Banks constitute “Required Banks” under and as defined in the Existing Reimbursement Agreement), Tempest and CitiBank as parties to a Bilateral Agreement and Barclays as a party to a Bilateral Agreement (collectively, the “Existing Agreements”) agree that each Existing Agreement shall terminate and be of no further force or effect on the Effective Date (except that any provision of any Existing Agreement that by its terms survives termination of such Existing Agreement shall remain in full force and effect), (ii) the Parent, the Administrative Agent, Barclays, as an Issuing Bank, and, by execution and delivery of a letter agreement substantially in the form of Exhibit C, the Trustees of the Lloyd’s Dollar Trust Funds of Syndicate 2488 (the “Trustees”) agree that each letter of credit issued under the Bilateral Agreement to which Barclays is a party shall be deemed to have been issued, and to be outstanding, for the joint account of the Parent and the Trustees and (iii) the relevant Account Parties and the Issuing Banks agree that each Existing Letter of Credit shall become a Letter of Credit hereunder on the Effective Date, in each case without any further action by any Person.

[Remainder of page intentionally left blank]

69

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

ACE LIMITED

The Common Seal of ACE Limited was hereunto affixed in the presence of:

Authorized Officer

Authorized Officer

ACE BERMUDA INSURANCE LTD.

The Common Seal of ACE Bermuda Insurance Ltd. was hereunto affixed in the presence of:

Authorized Officer

Authorized Officer

ACE TEMPEST LIFE REINSURANCE LTD.

The Common Seal of ACE Tempest Life Reinsurance Ltd. was hereunto affixed in the presence of:

Authorized Officer

Authorized Officer

(signatures continued)

Signature Page to Unsecured Reimbursement Agreement

ACE TEMPEST REINSURANCE LTD.

The Common Seal of ACE Tempest Reinsurance Ltd. was hereunto affixed in the presence of:

Authorized Officer

Authorized Officer

Address for each Account Party:

ACE Global Headquarters

17 Woodbourne Avenue

Hamilton HM08 Bermuda

Telecopy: (441) 296-0087

(signatures continued)

Signature Page to Unsecured Reimbursement Agreement

WACHOVIA BANK, NATIONAL ASSOCIATION, as Administrative Agent, as Issuing Bank and as an Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

BANK OF AMERICA, N.A., as Syndication Agent and as an Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

BARCLAYS BANK, PLC, as a Co-Documentation Agent, as an Issuing Bank and as an Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

CITIBANK, N.A., as a Co-Documentation Agent,
as an Issuing Bank and as an Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

JPMORGAN CHASE BANK, as a
Co- Documentation Agent and as an Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

DEUTSCHE BANK AG, NEW YORK BRANCH, as an Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

HSBC BANK USA, NATIONAL ASSOCIATION as an Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

ING BANK N.V., LONDON BRANCH, as an
Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

THE ROYAL BANK OF SCOTLAND PLC, as an Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

ABN AMRO BANK, N.V., as an Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

KEYBANK NATIONAL ASSOCIATION, as an Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

STATE STREET BANK AND TRUST
COMPANY, as an Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

BNP PARIBAS, as an Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

THE BANK OF TOKYO-MITSUBISHI, LTD. NEW YORK BRANCH, as an Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

COMERICA BANK, as an Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

LLOYDS TSB BANK PLC, as an Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

MELLON BANK, N.A., as an Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

NATIONAL AUSTRALIA BANK LIMITED, as
an Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

NATIONAL CITY BANK, as an Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

WELLS FARGO BANK, NATIONAL ASSOCIATION, as an Initial Bank

By:

Title:

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

THE BANK OF N.T. BUTTERFIELD & SON LIMITED, as an Initial Bank

By:

Title:

Signature Page to Unsecured Reimbursement Agreement

SCHEDULE I

LC COMMITMENT AMOUNTS

Wachovia Bank, National Association	$	62,900,000
Bank of America, N.A.	$	62,900,000
Barclays Bank PLC	$	59,800,000
CitiBank, N.A.	$	59,800,000
JPMorgan Chase Bank	$	59,800,000
Deutsche Bank AG, New York Branch	$	50,400,000
HSBC Bank USA, National Association	$	50,400,000
ING Bank N.V., London Branch	$	50,400,000
The Royal Bank of Scotland plc	$	50,400,000
ABN AMRO Bank, N.V.	$	40,900,000
KeyBank National Association	$	40,900,000
State Street Bank and Trust Company	$	40,900,000
BNP Paribas	$	25,200,000
The Bank of Tokyo-Mitsubishi, Ltd. New York Branch	$	25,200,000
Comerica Bank	$	25,200,000
Lloyds TSB Bank plc	$	25,200,000
Mellon Bank, N.A.	$	25,200,000
National Australia Bank Limited	$	25,200,000
National City Bank	$	25,200,000
Wells Fargo Bank, National Association	$	25,200,000
The Bank of N.T. Butterfield & Son Limited	$	18,900,000
Total	$	850,000,000

SCHEDULE I – PART 2

DOMESTIC LENDING OFFICES

Wachovia Bank, National Association	Agency Management Group 301 South College Street, 5th Floor Charlotte, North Carolina 28288-0737 Attn: Mark Felker Telephone: (704) 374-7074 Telecopy: (704) 383-7611
Bank of America, N.A.	231 S. LaSalle Street Chicago, Illinois 60697 Attn: Debra Basler Telephone: (312) 828-3734 Telecopy: (312) 987-0889
Barclays Bank PLC	P.O. Box 544 1st Floor 54 Lombard Street London EC3V 9EX England Attn: Neil Holmes Telephone: 44 (0) 20 7699 3125 Telecopy: 44 (0) 20 7699 2407 Copies to: Barclays Capital GSU, 5 North Colonade Canary Wharf London E14 4BB England Attn: Graham Smart Telephone: 44 (0) 20 7773 6450 Telecopy: 44 (0) 20 7773 6807
CitiBank, N.A.
JPMorgan Chase Bank	Financial Institutions Group 270 Park Avenue, 15th Floor New York, New York 10017 Attn: Helen Newcomb Telephone: (212) 270-6260 Telecopy: (212) 270-1511
Deutsche Bank AG, New York Branch	31 West 52nd Street Mail Stop NYC01-2402 New York, New York 10019 Attn: Clinton M. Johnson Telephone: (212) 469-8101 Telecopy: (212) 469-8366

HSBC Bank USA, National Association	452 Fifth Avenue, 5th Floor New York, New York 10018 Attn: Kenneth J. Johnson Telephone: (212) 525-2480 Telecopy: (212) 525-2479
ING Bank N.V., London Branch
The Royal Bank of Scotland plc
ABN AMRO Bank, N.V.	540 West Madison Street, Suite 2621 Chicago, Illinois 60661 Attn: Credit Administration Telecopy: (312) 992-5111 Copies to: 350 Park Avenue New York, NY 10055 Telecopy: (212) 409-1718
KeyBank National Association	127 Public Square, 6th Floor Cleveland, Ohio 44114 Attn: Mary K. Young Telephone: (216) 689-4443 Telecopy: (216) 689-4981
State Street Bank and Trust Company	Domestic Lending Office: 225 Franklin Street Boston, Massachusetts 02110 Address for notices: Lafayette Corporate Center 2 Avenue de Lafayette Boston, Massachusetts 02111 Attn: Edward M. Anderson, VP Telephone: (617) 662-3782 Telecopy: (617) 662-3778
BNP Paribas	787 7th Avenue, 28th Floor New York, New York 10019 Attn: Joshua Landau Telephone: (212) 841-3823 Telecopy: (212) 841-2533
The Bank of Tokyo-Mitsubishi, Ltd. New York Branch
Comerica Bank	500 Woodward Avenue Detroit, Michigan 48226-3331 Attn: Martin G. Ellis Telephone: (313) 222-9443 Telecopy: (313) 222-5466

2

Lloyds TSB Bank plc	1251 Avenue of the Americas, 39th Floor NY, NY 10020 Attn: Patricia Kilian, VP, Loans Administration Telephone: (212) 930-8914 Telecopy: (212) 930-5098
Mellon Bank, N.A.	One Mellon Center, Room 4505 Pittsburgh, Pennsylvania 15258-0001 Attn: Karla Maloof Telephone: (412) 236-4147 Telecopy: (412) 234-8087
National Australia Bank Limited	245 Park Avenue, 28th Floor New York, NY 10167 Attn: Mike McHugh Telephone: (212) 916-9559 Telecopy: (212) 949-9515
National City Bank	1 North Franklin, Suite 3600 Chicago, IL 60606 Attn: Gustavus Bahr Telephone: (312) 384- 6904 Telecopy: (312) 384- 4618
Wells Fargo Bank, National Association	90 So. 7th Street MAC N9305-075, 7th Floor Minneapolis, Minnesota 55402 Attn: Jason Paulnock Telephone: (612) 667-4742 Telecopy: (612) 667-7251
The Bank of N.T. Butterfield & Son Limited	65 Front Street Hamilton HM DX, Bermuda Attn: Jonathan Raynor, VP-Corporate Banking Telephone: (441) 298-4774 Telecopy: (441) 296-2851

3

SCHEDULE II

EXISTING LETTERS OF CREDIT

1. Wachovia Letter of Credit No. SM208430

Beneficiary: Travelers Indemnity Company

Amount: US $3,994,681.00

2. Wachovia Letter of Credit No. SM207678

Beneficiary: AIG Global Trade & Political Risk Insurance Co.

Amount: US $5,831,454.30

3. Wachovia Letter of Credit No. SM419119

Beneficiary: Pacific Employers Insurance Company

Amount: US $4,485,547.00

4. Wachovia Letter of Credit No. SM417961

Beneficiary: Westchester Surplus Lines Insurance

Amount: US $452,148.40

5. Wachovia Letter of Credit No. SM417966

Beneficiary: Illinois Union Insurance Company

Amount: US $1,333,050.77

6. Wachovia Letter of Credit No. SM421751

Beneficiary: North Carolina Commissioner of Insurance

Amount: US $25,000,000.00

7. Wachovia Letter of Credit No. SM206354

Beneficiary: Century Indemnity Insurance Company

Amount: US $6,000.00

8. Wachovia Letter of Credit No. SM206355

Beneficiary: Westchester Surplus Lines Insurance Company

Amount: US $670,000.00

9. Wachovia Letter of Credit No. SM206643

Beneficiary: Travelers Casualty & Surety Insurance Co. of America

Amount: US $5,727,949.40

10. Wachovia Letter of Credit No. SM419121

Beneficiary: Protective Life Insurance Company

Amount: US $22,000,000.00

11. Wachovia Letter of Credit No. SM419645

Beneficiary: Royal Trust Corp of Canada in Trust for Provident Life & Accident

Amount: CAD 1,963,500

12. Wachovia Letter of Credit No. SM419579

Beneficiary: Hartford Steam Boiler

Amount: US $2,199,452.00

13. Wachovia Letter of Credit No. SM421261

Beneficiary: American Int’l Life Assurance Co. of America

Amount: US $7,000,733.00

14. Wachovia Letter of Credit No. SM418289

Beneficiary: Reliastar Life Insurance Company

Amount: US $9,582,548.00

15. Wachovia Letter of Credit No. SM421259

Beneficiary: AIG Life

Amount: US $21,452,166.00

16. Wachovia Letter of Credit No. SM417967

Beneficiary: ACE Guaranty

Amount: US $19,700,000.00

17. Wachovia Letter of Credit No. SM419487

Beneficiary: Reliastar Life Insurance Company

Amount: US $39,405,795.00

18. Wachovia Letter of Credit No. SM200611

Beneficiary: State Compensation Insurance Fund

Amount: US $61,220,438.00

19. Wachovia Letter of Credit No. SM202228

Beneficiary: AIG Global Trade & Political

Amount: US $1,430,200.00

20. Wachovia Letter of Credit No. SM201521

Beneficiary: ACE Property Casualty Insurance

Amount: US $301,000.00

21. Wachovia Letter of Credit No. SM201520

Beneficiary: Illinois Union Insurance Company

Amount: US $382,000.00

2

22. Wachovia Letter of Credit No. SM201522

Beneficiary: ACE Property Casualty Insurance Company

Amount: US $2,900,000.00

23. Wachovia Letter of Credit No. SM201523

Beneficiary: ACE Property Casualty Insurance Company

Amount: US $21,900,000.00

24. Wachovia Letter of Credit No. SM204791

Beneficiary: Pacific Employers Insurance Company

Amount: US $5,540,178.00

25. Wachovia Letter of Credit No. SM422302

Beneficiary: Liberty International Insurance Ltd.

Amount: HKD 42,500,000.00

26. Wachovia Letter of Credit No. SM200454

Beneficiary: Pacific Employers Insurance Company

Amount: US $1,636,220.00

27. Wachovia Letter of Credit No. SM205298

Beneficiary: Illinois Union Insurance Company

Amount: US $1,000,000.00

28. Wachovia Letter of Credit No. SM205299

Beneficiary: ACE American Insurance Company

Amount: US $1,308,447.00

29. Wachovia Letter of Credit No. SM205102

Beneficiary: Pacific Employers Insurance Company

Amount: US $2,492,563.00

30. Wachovia Letter of Credit No. SM202814

Beneficiary: Pacific Employers Insurance Company

Amount: US $5,500,000.00

31. Wachovia Letter of Credit No. SM201338

Beneficiary: ACE USA Companies

Amount: US $677,618.68

32. Wachovia Letter of Credit No. SM202203

Beneficiary: Zuellig Insurance Management Ltd.

Amount: HKD 42,500,000.00

3

33. Wachovia Letter of Credit No. SM422299

Beneficiary: Pacific Employers Insurance Company

Amount: US $3,000,000.00

34. Wachovia Letter of Credit No. SM208401

Beneficiary: ACE American Insurance Company

Amount: US $808,363.00

35. Wachovia Letter of Credit No. SM209675

Beneficiary: ACE American Insurance Company

Amount: US $64,345.95

36. Wachovia Letter of Credit No. SM205103

Beneficiary: The Manufacturers Life Insurance Co. of NY

Amount: US $2,000,000.00

37. Wachovia Letter of Credit No. SM201398

Beneficiary: Nationwide Financial Services (Bermuda) Ltd.

Amount: US $280,000.00

38. Wachovia Letter of Credit No. SM201345

Beneficiary: Censeco Variable Insurance Company

Amount: US $500,000.00

39. Wachovia Letter of Credit No. SM201342

Beneficiary: Jackson National Life Insurance Company

Amount: US $2,200,000.00

40. Wachovia Letter of Credit No. SM201646

Beneficiary: Allmerica Financial Life and Annuity Company

Amount: US $20,475,000.00

41. Wachovia Letter of Credit No. SM206968

Beneficiary: Delaware American Life Insurance Company

Amount: US $185,036.00

42. Wachovia Letter of Credit No. SM206191

Beneficiary: Merrill Lynch Life Insurance Co.

Amount: US $1,250,000.00

43. Wachovia Letter of Credit No. SM206638

Beneficiary: Equitable Life Assurance Society of the US

Amount: US $16,000,000.00

4

44. Wachovia Letter of Credit No. SM203217

Beneficiary: Manufacturers Life Insurance Company

Amount: US $18,500,000.00

45. Barclays Letter of Credit No. LOC 02127

Beneficiary: CitiBank NA as trustees of Syndicate 2488 SLTF

Amount: US $100,371,105

46. Barclays Letter of Credit No. LOC 03088

Beneficiary: CitiBank NA as trustees of Syndicate 2488 SLTF

Amount: US $44,031,933

47. Barclays Letter of Credit No. LOC 04039

Beneficiary: CitiBank NA as trustees of Syndicate 2488 CRTF

Amount: US $38,712,756

48. Barclays Letter of Credit No. LOC 04040

Beneficiary: CitiBank NA as trustees of Syndicate 2488 SLTF

Amount: US $16,884,800

49. CitiBank Letter of Credit No. 0159208

Beneficiary: HOME INSURANCE COMPANY, INC.

Amount: US $172,088.69

50. CitiBank Letter of Credit No. 0159209

Beneficiary: WESTCHESTER FIRE INSURANCE

Amount: US $148,033.40

51. CitiBank Letter of Credit No. 0159223

Beneficiary: TIG INSURANCE COMPANY

Amount: US $149,056.70

52. CitiBank Letter of Credit No. 0159415

Beneficiary: CHURCH INSURANCE COMPANY

Amount: US $8,120.19

53. CitiBank Letter of Credit No. 0159588

Beneficiary: FACTORY MUTUAL INSURANCE COMPANY

Amount: US $292,614.03

54. CitiBank Letter of Credit No. 0159737

Beneficiary: AMERICAN AGRICULTURAL INSURANCE

Amount: US $4,132.50

5

55. CitiBank Letter of Credit No. 0159895

Beneficiary: UNITED STATES FIRE

Amount: US $869,265.45

56. CitiBank Letter of Credit No. 0159898

Beneficiary: CHUBB AND SON INC FOR AND ON

Amount: US $229,884.20

57. CitiBank Letter of Credit No. 0159912

Beneficiary: ST PAUL FIRE AND MARINE

Amount: US $1,873,170.67

58. CitiBank Letter of Credit No. 0159939

Beneficiary: NEW YORK CENTRAL MUTUAL FIRE

Amount: US $11,019.58

59. CitiBank Letter of Credit No. 0159973

Beneficiary: FIRE INSURANCE EXCHANGE

Amount: US $5,630,749.68

60. CitiBank Letter of Credit No. 0160008

Beneficiary: ROYAL INDEMNITY COMPANY

Amount: US $2,531,800.00

61. CitiBank Letter of Credit No. 0160263

Beneficiary: CAMERON MUTUAL INSURANCE COMPANY

Amount: US $86,487.56

62. CitiBank Letter of Credit No. 0160264

Beneficiary: AAA MICHIGAN

Amount: US $1,500.00

63. CitiBank Letter of Credit No. 0160303

Beneficiary: HSB INDUSTRIAL RISK INSURERS

Amount: US $10,395,669.83

64. CitiBank Letter of Credit No. 0160305

Beneficiary: SOUTHERN FARM BUREAU PROPERTY

Amount: US $14,965.56

65. CitiBank Letter of Credit No. 0160306

Beneficiary: SHELTER MUTUAL INSURANCE COMPANY

Amount: US $675,830.44

6

66. CitiBank Letter of Credit No. 0160308

Beneficiary: COTTON STATES MUTUAL INSURANCE

Amount: US $10,560,479.04

67. CitiBank Letter of Credit No. 0160309

Beneficiary: AMERICAN FAMILY MUTUAL INSURANCE

Amount: US $324,701.30

68. CitiBank Letter of Credit No. 0160311

Beneficiary: UNION MUTUAL FIRE INSURANCE

Amount: US $342,996.93

69. CitiBank Letter of Credit No. 0160312

Beneficiary: GRE INSURANCE GROUP

Amount: US $837.50

70. CitiBank Letter of Credit No. 0160313

Beneficiary: SOUTH CAROLINA FARM BUREAU

Amount: US $2,850.00

71. CitiBank Letter of Credit No. 0160314

Beneficiary: GENERAL REINSURANCE CORPORATION

Amount: US $91,456.59

72. CitiBank Letter of Credit No. 0160316

Beneficiary: ASSOCIATED INTERNATIONAL INSURANCE

Amount: US $1,019,337.02

73. CitiBank Letter of Credit No. 0160327

Beneficiary: SOUTHERN GUARANTY

Amount: US $1,424,225.61

74. CitiBank Letter of Credit No. 0160362

Beneficiary: FARM BUREAU MUTUAL INSURANCE

Amount: US $3,420.00

75. CitiBank Letter of Credit No. 0162400

Beneficiary: ONE BEACON INSURANCE GROUP

Amount: US $694,925.46

76. CitiBank Letter of Credit No. 0601120

Beneficiary: AUSTIN MUTUAL INSURANCE COMPANY

Amount: US $2,932.64

7

77. CitiBank Letter of Credit No. 0601121

Beneficiary: FOLKSAMERICA REINSURANCE COMPANY

Amount: US $69,815.15

78. CitiBank Letter of Credit No. 0601125

Beneficiary: INSURANCE COMPANY OF THE WEST

Amount: US $44,596.07

79. CitiBank Letter of Credit No. 0601126

Beneficiary: ZEPHYR INSURANCE COMPANY

Amount: US $952,836.10

80. CitiBank Letter of Credit No. 0601193

Beneficiary: CITIZENS INSURANCE CO OF AMERICA

Amount: US $290,984.54

81. CitiBank Letter of Credit No. 0601194

Beneficiary: THE HANOVER INSURANCE COMPANY

Amount: US $766,253.75

82. CitiBank Letter of Credit No. 0601197

Beneficiary: AMERICAN AGRICULTURAL INS CO

Amount: US $131,993.00

83. CitiBank Letter of Credit No. 0601235

Beneficiary: ONYX INSURANCE GROUP

Amount: US $100,400.62

84. CitiBank Letter of Credit No. 0601398

Beneficiary: PUBLIC SERVICE MUTUAL INSURANCE

Amount: US $10,932.50

85. CitiBank Letter of Credit No. 0601399

Beneficiary: HARTFORD FIRE INSURANCE COMPANY

Amount: US $354,090.67

86. CitiBank Letter of Credit No. 0601400

Beneficiary: REPUBLIC UNDERWRITERS INSURANCE

Amount: US $17,217.20

87. CitiBank Letter of Credit No. 0601402

Beneficiary: HASTINGS MUTUAL INSURANCE COMPANY

Amount: US $2,900.00

8

88. CitiBank Letter of Credit No. 0601403

Beneficiary: ZURICH US

Amount: US $750,000.00

89. CitiBank Letter of Credit No. 0601455

Beneficiary: CAPACITY INSURANCE COMPANY

Amount: US $17,690.25

90. CitiBank Letter of Credit No. 0601456

Beneficiary: SOMPO JAPAN INSURANCE COMPANY

Amount: US $18,451.36

91. CitiBank Letter of Credit No. 0601457

Beneficiary: METROPOLITAN PROPERTY CASUALTY

Amount: US $63,241.56

92. CitiBank Letter of Credit No. 0601458

Beneficiary: INDUSTRIAL RISK INSURERS (97)

Amount: US $2,500,000.00

93. CitiBank Letter of Credit No. 0601459

Beneficiary: MISSISSIPPI FARM BUREAU MUTUAL I

Amount: US $10,968.21

94. CitiBank Letter of Credit No. 0601460

Beneficiary: GRANGE MUTUAL INSURANCE

Amount: US $105,325.30

95. CitiBank Letter of Credit No. 0601461

Beneficiary: EMPLOYERS MUTUAL CASUALTY COMPANY

Amount: US $27,221.41

96. CitiBank Letter of Credit No. 0601462

Beneficiary: HARLEYSVILLE INSURANCE COMPANIES

Amount: US $25,482.65

97. CitiBank Letter of Credit No. 0601465

Beneficiary: DONEGAL MUTUAL INSURANCE COMPANY

Amount: US $14,950.00

98. CitiBank Letter of Credit No. 0601489

Beneficiary: NEW AMERICA

Amount: US $227,475.00

9

99. CitiBank Letter of Credit No. 0601527

Beneficiary: FARMERS HOME MUTUAL INSURANCE CO

Amount: US $1,336.86

100. CitiBank Letter of Credit No. 0601545

Beneficiary: PACIFIC SPECIALTY INSURANCE CO

Amount: US $271,534.94

101. CitiBank Letter of Credit No. 0601551

Beneficiary: AMERICAN AGRICULTURAL INS CO

Amount: US $1,360,538.44

102. CitiBank Letter of Credit No. 0601552

Beneficiary: UPLAND MUTUAL INSURANCE INC

Amount: US $89,132.38

103. CitiBank Letter of Credit No. 0601558

Beneficiary: MUTUAL OF ENUMCLAW INSURANCE CO

Amount: US $112,500.00

104. CitiBank Letter of Credit No. 0601605

Beneficiary: HARBOR SPECIALTY INSURANCE CO

Amount: US $32,477.28

105. CitiBank Letter of Credit No. 0601606

Beneficiary: CLARENDON AMERICA INSURANCE CO

Amount: US $74,600.61

106. CitiBank Letter of Credit No. 0601607

Beneficiary: CLARENDON SELECT INSURANCE COMPANY

Amount: US $74,160.05

107. CitiBank Letter of Credit No. 0601608

Beneficiary: ACE PROPERTY CASUALTY INSURANCE

Amount: US $670,362.06

108. CitiBank Letter of Credit No. 0601609

Beneficiary: EMPIRE FIRE AND MARINE INS CO

Amount: US $159,940.04

109. CitiBank Letter of Credit No. 0601630

Beneficiary: AMERICAN GROWERS INSURANCE COMPANY

Amount: US $58,414.88

10

110. CitiBank Letter of Credit No. 0601669

Beneficiary: CLARENDON NATIONAL INSURANCE CO.

Amount: US $199,689.95

111. CitiBank Letter of Credit No. 0601670

Beneficiary: ACE AMERICAN INSURANCE COMPANY

Amount: US $44,852.60

112. CitiBank Letter of Credit No. 0601677

Beneficiary: CONTINENTAL CASUALTY COMPANY

Amount: US $100,000.00

113. CitiBank Letter of Credit No. 0601683

Beneficiary: EMPIRE FIRE AND MARINE INS CO

Amount: US $28,181.75

114. CitiBank Letter of Credit No. 0601684

Beneficiary: GENERAL REINSURANCE CORPORATION

Amount: US $118,807.43

115. CitiBank Letter of Credit No. 0601708

Beneficiary: CINCINNATI INSURANCE COMPANY

Amount: US $422.26

116. CitiBank Letter of Credit No. 0601718

Beneficiary: AUDUBON INSURANCE COMPANY

Amount: US $6,325.72

117. CitiBank Letter of Credit No. 0601720

Beneficiary: BRETHREN MUTUAL INSURANCE

Amount: US $1,533,452.12

118. CitiBank Letter of Credit No. 0601805

Beneficiary: HIGH POINT PREFERRED INSURANCE C

Amount: US $182,296.88

119. CitiBank Letter of Credit No. 0601806

Beneficiary: PHILADELPHIA INSURANCE COMPANY

Amount: US $194,310.43

120. CitiBank Letter of Credit No. 0601807

Beneficiary: STATE AUTOMOBILE MUTUAL INS. CO.

Amount: US $640,188.49

11

121. CitiBank Letter of Credit No. 0601808

Beneficiary: NC GRANGE MUTUAL INSURANCE

Amount: US $225,626.54

122. CitiBank Letter of Credit No. 0601809

Beneficiary: CENTRAL MUTUAL INSURANCE COMPANY

Amount: US $18,456.04

123. CitiBank Letter of Credit No. 0601810

Beneficiary: NATIONAL GRANGE MUTUAL INS. CO.

Amount: US $135,804.77

124. CitiBank Letter of Credit No. 0601829

Beneficiary: ARMED FORCES INSURANCE EXCHANGE

Amount: US $203,361.47

125. CitiBank Letter of Credit No. 0601866

Beneficiary: STATE FARM FIRE CASUALTY CO

Amount: US $303,935.38

126. CitiBank Letter of Credit No. 0601873

Beneficiary: LOUISIANA JOINT REINSURANCE

Amount: US $434,764.15

127. CitiBank Letter of Credit No. 0601874

Beneficiary: ACE PROPERTY CASUALTY INSURANCE

Amount: US $43,894.69

128. CitiBank Letter of Credit No. 0601901

Beneficiary: CALIFORNIA CASUALTY GROUP

Amount: US $279,062.00

129. CitiBank Letter of Credit No. 0601903

Beneficiary: PIEDMONT MUTUAL

Amount: US $50,000.00

130. CitiBank Letter of Credit No. 0601904

Beneficiary: EDGECOMBE FARMERS MUTUAL

Amount: US $7,500.00

131. CitiBank Letter of Credit No. 0601907

Beneficiary: ARCH SPECIALTY INSURANCE COMPANY

Amount: US $107,170.00

12

132. CitiBank Letter of Credit No. 601464

Beneficiary: LA SOCIETE DE PORTEFEUILLE

Amount: CAD $350,694.37

133. CitiBank Letter of Credit No. 81932

Beneficiary: ACE INSURANCE LTD

Amount: HKD $39,000,000.00

13

SCHEDULE 4.01(B)

SUBSIDIARIES

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
ACE Limited	Cayman Islands	Publicly held	Bermuda, holding company
ACE Bermuda Insurance Ltd.	Bermuda	100%	Bermuda, insurance, reinsurance, general and long term; Mexico, reinsurance
ACE PCC Insurance Limited	Guernsey	100%	Guernsey, protected cell rent-a-captive business
Paget Reinsurance International Ltd.	Bermuda	100%	Bermuda, insurance/reinsurance
ACE Capital Title Reinsurance Company (EI# 06-1434264, NAIC# 50028, NY)	New York	100%	CA, MI, NY, TX, title insurance/reinsurance
Oasis Investments Limited	Bermuda	67%	Bermuda, Investment Holding
Oasis Investments 2 Ltd.	Bermuda	67%	Bermuda, holding company
ACE Financial Solutions International, Ltd.	Bermuda	100%	Bermuda, insurance management
ACE European Markets Reinsurance Limited	Ireland	100%	Ireland, general and life reinsurance
ACE European Markets Insurance Limited	Ireland	100%	EEA/Europe, direct non-life insurance, UK branch
Corporate Officers & Directors Assurance Ltd.	Bermuda	100%	Bermuda, insurance
Oasis Real Estate Company Ltd.	Bermuda	100%	Bermuda, investment holding
Scarborough Property Holdings Ltd.	Bermuda	40%	Bermuda, investment holding
Sovereign Risk Insurance Limited	Bermuda	50%	Bermuda, insurance agent
Tripar Partnership	Bermuda	98% 2% (CODA)	Bermuda, investment holding
ACE Realty Holdings Limited	Bermuda	100%	Bermuda, investment holding

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
Oasis Personnel Limited	Cayman Islands	100%	Cayman Islands, general services
Shipowners Insurance and Guaranty Co. Limited	Bermuda	10% Series A 8% Series B	Bermuda, insurance
Intrepid Re Holdings Limited	Bermuda	38.5%	Bermuda, holding
Intrepid Re Limited	Bermuda	100%	Bermuda, Reinsurance
Freisenbruch-Meyer Insurance Ltd.	Bermuda	40%	Bermuda, local and commercial insurance
Freisenbruch-Meyer Insurance Services Ltd.	Bermuda	40%	Bermuda, local and commercial insurance
Assured Guaranty Ltd. (formerly AGC Holdings Limited)	Bermuda	35% (remaining 65% is publicly held)	Bermuda, holding company
Assured Guaranty Re International Ltd. (formerly ACE Capital Re International Ltd.)	Bermuda	100%	Bermuda, insurance/reinsurance, general and long term
Assured Guaranty Barbados Holdings Ltd. (formerly ACE KRE Holdings Limited)	Barbados	100%	Barbados, investment holding
Assured Guaranty Overseas US Holdings Inc. (formerly ACE Capital Re USA Holdings Incorporated)	Delaware	100%	Delaware, investment holding
Assured Guaranty Re Overseas Ltd. (formerly ACE Capital Re Overseas Ltd.)	Bermuda	100%	Bermuda, insurance/reinsurance, general and long term
Assured Guaranty Mortgage Insurance Company (formerly ACE Capital Mortgage Reinsurance Co.) (EI# 06-1384770, NAIC# 10021, NY)	New York	100%	New York, DC, mtg. guaranty insurance/reinsurance
AG Intermediary Inc. (formerly ACE Capital Re Inc.)	New York	100%	New York, reinsurance intermediary
Assured Guaranty Finance Overseas Ltd. (formerly ACE Finance Overseas Limited)	United Kingdom	100%
Assured Guaranty US Holdings Inc.	Delaware	100%	Delaware, holding company
AG Financial Products Inc. (formerly AGR Financial Products Inc.)	USA (Delaware)	100%	Delaware, financial products
Assured Guaranty Corp. (formerly ACE Guaranty Corp.) (EI#52 - 1533088, NAIC #30180, MD)	Maryland	100%	US, insurance company

15

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
Assured Guaranty (UK) Ltd. (formerly ACE Guaranty (UK) Ltd.)	United Kingdom	100%	UK, applying for license to be financial guaranty insurer
ACE Risk Assurance Company (EI# 13-4027591, NAIC #10943, MD)	Maryland	100%	Maryland, reinsurance
ACE Global Markets Limited	United Kingdom	100%	UK, investment holding
ACE Group Holdings Limited	United Kingdom	100%	UK, investment holding
ACE Tarquin	United Kingdom	100%	UK, investment holding
ACE Capital V Limited	United Kingdom	100%	UK, Lloyd’s corporate member; capital provider
ACE Leadenhall Limited	United Kingdom	100%	UK, investment holding
ACE Underwriting Agencies Limited	United Kingdom	100%	UK, Lloyd’s managing agency
ACE Trustees Limited	United Kingdom	100%	UK, investment holding
ACE London Group Limited	United Kingdom	100%	UK, investment holding
ACE Capital Limited	United Kingdom	100%	UK, Lloyd’s corporate member
ACE Capital III Limited	United Kingdom	100%	UK, Lloyd’s corporate member
ACE Capital IV Limited	United Kingdom	100%	UK, Lloyd’s corporate member; capital provider
ACE London Holdings Limited	United Kingdom	100%	UK, investment holding
ACE Capital II Limited	United Kingdom	100%	UK, Lloyd’s corporate member
ACE London Investments Limited	United Kingdom	100%	UK, investment holding
ACE London Aviation Limited	United Kingdom	100%	UK, Lloyd’s managing agent
ACE London Underwriting Limited	United Kingdom	100%	UK, Lloyd’s managing agent
ACE Underwriting Services Limited	United Kingdom	100%	UK, Lloyd’s service company
AGM Underwriting Limited	United Kingdom	100%	UK, dormant
ACE London Services Limited	United Kingdom	100%	UK, service company
ACE Capital VI Limited	United Kingdom	100%	UK, Lloyd’s corporate member
ACE UK Limited	United Kingdom	77%	UK, investment holding

16

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
ACE UK Holdings Limited	United Kingdom	100%	UK, investment holding
ACE (MI) Limited	United Kingdom	100%	UK, dormant
ACE (MS) Limited	United Kingdom	100%	UK, dormant
ACE UK Underwriting Limited	United Kingdom	100%	Lloyd’s managing agent
ACE (PM) Limited	United Kingdom	100%	UK, investment holding
ACE UK Limited	United Kingdom	23%	UK, investment holding
ACE Services Limited	Cayman Islands	100%	Cayman Islands, general services
ACE Holdings (Gibraltar) Limited	Gibraltar	100%	Gilbraltar, Bermuda permit, investment holding
ACE Gibraltar Limited	Gibraltar	51%	Gilbraltar, insurance intermediary
ACE-ii Limited	United Kingdom	100%	dormant, to become internet company
ACE-ii (Gibraltar) Limited	Gibraltar	100%	dormant,
ACE Underwriting Services (Gibraltar) Limited	Gibraltar	100%	dormant,
Arles Services Limited	Gibraltar	100%	dormant,
CGA Group Limited	Bermuda	18.20%	Bermuda investment holding
CGA Investment Management, Inc.	USA (Delaware)	100%	USA, investment
Commercial Guaranty Assurance Ltd.	Bermuda	100%	Bermuda, insurance
Oasis Insurance Services Ltd.	Bermuda	100%	Bermuda, general services
ACE Tempest Life Reinsurance Ltd.	Bermuda	100%	Bermuda, insurance, reinsurance, general and long term (life, health, annuities)
ACE Tempest Reinsurance Ltd.	Bermuda	100%	Bermuda, insurance/reinsurance, long term; Puerto Rico, reinsurance
Oasis Investments Limited	Bermuda	33%	Bermuda, investment holding
Oasis Investments 2 Ltd.	Bermuda	33%	Bermuda, holding company
St. George Holdings Ltd	Cayman Islands	10.71%	Cayman Islands, investment holding

17

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
St. George Investments Ltd.	Cayman Islands	100%	Cayman Islands, investment holding
ACE INA Holdings Inc.	USA (Delaware)	20%	USA, investment holding
ACE Prime Holdings Inc.	USA (Delaware)	100%	USA, investment holding
ACE INA Holdings Inc.	USA (Delaware)	80%	USA, investment holding
ACE Seguros S.A.	Argentina	99.35%	Argentina, Insurance
Huatai Insurance Company of China, Limited	China	6.129% 10% (ACE Tempest Reinsurance Ltd.) 6% (ACE US Holdings, Inc.)	China, property and casualty insurer
ACE Seguradora S.A.	Brazil	99.9% 0.1% (ACE Prime Holdings Inc.)	Brazil, insurance
Servicios ACE INA S.A. de C.V.	Mexico	99.99% .00002% (ACE Prime Holdings Inc.)	Mexico, service company
ACE Tempest Re USA, Inc.	USA (Connecticut)	100%	CT, NJ, NY, OH, PA, SC, TX, reinsurance intermediary manager
INA Corporation	USA (Pennsylvania)	100%	USA, investment holding company
ACE INA Properties, Inc.	USA (Delaware)	100%	USA, holding company
Conference Facilities, Inc.	USA (Pennsylvania)	100%	USA, owns & operates corporate facilities
INA Tax Benefits Reporting, Inc.	USA (Delaware)	100%	USA, tax info & 3rd party reporting
INA Financial Corporation	USA (Delaware)	100%	USA, investment holding
Brandywine Holdings Corporation	USA (Delaware)	100%	USA, holding company

18

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
Brandywine Run-Off Services, Inc.	USA (Delaware)	100%	USA, management company for 1792
Assurex Development Corporation	USA (Ohio)	11.011%	USA, provides loans to insurance agents
Cravens, Dargan & Company, Pacific Coast	USA (Delaware)	100%	USA, managing general agency
Cravens, Dargan & Company, Pacific Coast of Illinois, Inc.	USA (Illinois)	100%	USA, managing general agency
Century Indemnity Company (EI# 05-6105395, NAIC #20710, PA)	USA (Pennsylvania)	100%	USA, insurance
Century Reinsurance Company (EI# 06-0988117, NAIC #35130, PA)	USA (Pennsylvania)	100%	USA, reinsurance
ACE American Reinsurance Company (EI# 23-1740414, NAIC#22705, PA)	USA (Pennsylvania)	100%	USA, reinsurance
Brandywine Reinsurance Company S.A.-N.V.	Belgium	100%	Belgium, reinsurance
The 1792 Company	USA (Delaware)	100%	USA, (former underwriting member of New York Insurance Exchange)
Century International Reinsurance Company Ltd.	Bermuda	100%	Bermuda, insurance & reinsurance
INA Holdings Corporation	USA (Delaware)	100%	USA, holding company
INATrust, fsb	Chartered by Office of Thrift Supervision	100%	USA, savings bank
INA Reinsurance Company, Ltd.	Bermuda	100%	Bermuda, reinsurance
ACE INA Financial Institution Solutions, Inc.	USA (Delaware)	100%	USA, floodplain determination & other services to financial institutions
American Lenders Facilities, Inc.	USA (California)	100%	USA, collection & loan servicing for third parties
ESIS, Inc.	USA (Pennsylvania)	100%	USA, markets risk management Programs

19

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
NewMarkets Insurance Agency, Inc.	USA (Delaware)	100%	USA, managing general agency
ACE INA Excess and Surplus Insurance Services, Inc.	USA (Georgia)	100%	USA, excess & surplus lines broker
ACE INA Excess and Surplus Insurance Services, Inc.	USA (Pennsylvania)	100%	USA, excess & surplus lines broker
ACE INA Excess and Surplus Insurance Services, Inc.	USA (California)	100%	USA, excess & surplus lines broker
ACE INA Excess and Surplus Insurance Services, Inc.	USA (Illinois)	100%	USA, excess & surplus lines broker
Excess and Surplus Insurance Services, Inc.	USA (Texas)	100%	USA, managing general agency
ACE Financial Solutions, Inc.	USA (Delaware)	100%	USA, premium finance company
Oasis US Inc.	USA (Delaware)	100%	USA, general services
ACE Risk Solutions, Inc.	USA (NewYork)	100%	USA, reinsurance intermediary
Indemnity Insurance Company of North America (EI# 06-1016108, NAIC #43575, PA)	USA (Pennsylvania)	100%	USA, Puerto Rico, USVI, insurance
ACE Indemnity Insurance Company (EI#92-0040526, NAIC #10030, PA)	USA (Pennsylvania)	100%	USA, insurance
Allied Insurance Company (EI# 23-2021364, NAIC #36528, CA)	USA (California)	100%	USA, insurance
ACE American Insurance Company (EI#95-2371728, NAIC# 22667, PA)	USA (Pennsylvania)	100%	USA, Korea, Puerto Rico USVI, Guam, Bermuda permit, Taiwan (life), insurance
Pacific Employers Insurance Company (EI#95-1077060, NAIC# 22748, PA)	USA (Pennsylvania)	100%	USA, USVI, insurance
ACE Insurance Company of Texas (EI# 74-1480965, NAIC #22721, 22920, TX)	USA (Texas)	100%	USA, insurance

20

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
Illinois Union Insurance Company (EI# 36-2759195, NAIC #27960, IL)	USA (Illinois)	100%	USA, surplus lines insurer
Rain and Hail Insurance Service Incorporated	USA (Iowa)	20%
INAMAR Insurance Underwriting Agency, Inc.	USA (New Jersey)	100%	USA, insurance agency
INAMAR Insurance Underwriting Agency, Inc. of Massachusetts	USA (Massachusetts)	100%	USA, general agency
INAMAR Insurance Underwriting Agency, Inc. of Texas	USA (Texas)	100%	USA, general agency
INAMAR Insurance Underwriting Agency, Inc. of Ohio	USA (Ohio)	100%	USA, general agency
Insurance Company of North America (EI# 23-0723970, NAIC #22713, PA)	USA (Pennsylvania)	100%	USA, Guam, Northern Mariana Islands, Philippines, Puerto Rico, Taiwan (p/c), insurance
Bankers Standard Insurance Company (EI# 75-1320184, NAIC #18279, PA)	USA (Pennsylvania)	100%	USA, insurance
Bankers Standard Fire and Marine Company (EI#75-6014863, NAIC #20591, PA)	USA (Pennsylvania)	100%	USA, insurance
ACE Property and Casualty Insurance Company (EI# 06-0237820, NAIC, #20699, PA)	USA (Pennsylvania)	100%	USA, Puerto Rico, insurance
ACE Employers Insurance Company (EI# 23-2137343, NAIC #38741, PA)	USA (Pennsylvania)	100%	USA, insurance
ACE Insurance Company of Ohio (EI#23-1859893, NAIC #22764, OH)	USA (Ohio)	100%	USA, insurance
INA Surplus Insurance Company (EI# 52-1208598, NAIC #42072, PA)	USA (Pennsylvania)	100%	USA, reinsurance
ACE Fire Underwriters Insurance Company (EI# 06-6032187, NAIC #20702, PA)	USA (Pennsylvania)	100%	USA, insurance

21

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
Atlantic Employers Insurance Company (EI# 23-2173820, NAIC #38938, NJ)	USA (New Jersey)	100%	USA, insurance
Cover-All Technologies, Inc.	USA (Delaware)	7.41%	USA, develop software products for insurance industry
ALIC, Incorporated	USA (Texas)	100%	USA, general agency & attorney-in-fact for ACE Lloyds
ACE American Lloyds Insurance Company (Sponsored Lloyds Association) (EI# 75-1365570, NAIC #18511, TX)	USA (Texas)	100%	USA, Lloyds Association
ACE Insurance Company of Illinois (EI# 36-2709121, NAIC #22691, IL)	USA (Illinois)	100%	USA, insurance
ACE Insurance Company of the Midwest (EI# 06-0884361, NAIC #26417, IN)	USA (Indiana)	100%	USA, insurance
ATR USA, LLC	USA (Connecticut)	100%	USA, reinsurance intermediary manager
ACE Structured Products, Inc. (formerly INAPRO, Inc.)	USA (Delaware)	100%	USA, insurance management services & underwriting
Recovery Services International, Inc.	USA (Delaware)	100%	USA, subrogation, collection & recovery services
RSI Health Care Recovery, Inc.	USA (Delaware)	100%	USA, subrogation, collection & recovery services
ACE INA International Holdings, Ltd.	USA (Delaware)	100%	USA, international insurance & financial holding company
ACE Insurance S.A.	Macau	99.94%	Macau, insurance
ACE CIIC Holdings Limited	Cayman Islands	100%	Cayman Islands, holding company
ACE CIIC Insurance Company Egypt S.A.E.	Egypt	51%	Egypt, insurance

22

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
ACE European Holdings Limited	United Kingdom	100%	United Kingdom, holding company
ACE Life Insurance Company S.A.E.	Egypt	99%	Egypt, life insurance
ACE Synergy Insurance Berhad	Malaysia	51%	Malaysia, insurance
ACE Insurance S.A.-N.V.	Belgium	.0523% 99.9477% (ACE INA Overseas Holdings, Inc.)	Europe, insurance/reinsurance
ACE Seguros S.A.	Chile	78.104% (AIIH) 12.235% (AFIA Finance Corporation, Agencia en Chile) 9.095% - (AFIA Finance Corp. Chile Limitada)	Chile, insurance
ACE Seguros S.A.	Colombia	99.958%	Colombia, insurance
ACE Seguros S.A.	Ecuador	100%	Ecuador, insurance
ACE Seguros S.A.	Mexico	99.9%	Mexico, insurance/assumed reinsurance
Brandywine Reinsurance Co. (UK) Ltd	United Kingdom	100%	UK, reinsurance
ACE INA UK Limited	United Kingdom	100%	UK, Greece, insurance
Eksupsiri Company Limited	Thailand	49% 50.99% (Nam Ek)	Thailand, holding company
ACE Life Assurance Co. Ltd.	Thailand	75% 25% (Oriental)	Thailand, life insurance
Nam Ek Company Limited	Thailand	49%	Thailand, holding company
Chilena Consolidata Seguros Generales, S.A.	Chile	.65%	Chile, insurance
ACE Insurance Limited	South Africa	100%	South Africa, insurance
ACE Insurance Limited	New Zealand	100%	New Zealand, insurance/reinsurance
ACE International Management Corporation	Pennsylvania	100%	Management Services
Cover Direct, Inc.	USA (Delaware)	100%	Japan, direct marketing service Company

23

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
Victoria Hall Company Limited	Bermuda	20%	Bermuda, investment holding
ACE INA G.B. Holdings, Ltd	USA (Delaware)	100%	Delaware, UK, insurance holding
ACE INA Services U.K. Limited	United Kingdom	100%	UK, computer services for affiliates
INACAP Sociedad Anonima	Nicaragua	100%	Nicaragua, holding company
INACAP Reaseguros, Sociedad Anonima	Nicaragua	100%	Nicaragua, reinsurance broker
Century Inversiones, S.A.	Panama	100%	Panama, reinsurance administrator
Arabia ACE Insurance Company Limited E.C.	Bahrain	25%	Saudi Arabia, insurance & reinsurance
ACE Insurance Limited	Australia	100%	Australia, Pakistan, Thailand, Solomon Islands, Vanuatu, insurance & reinsurance
ACE INA Superannuation Pty. Limited	Australia	100%	Australia, corporate trustee for ACE Australia superannuation plan
ACE Insurance Limited	Pakistan	100%	Pakistan, insurance
ACE INA Overseas Insurance Company Ltd.	Bermuda	100%	Bermuda, insurance/reinsurance, general and long term
ACE Insurance Limited	Singapore	100%	Singapore, insurance
ACE Insurance	Japan	100%	Japan, insurance/reinsurance
ACE Songai Service Kabushikigaisha	Japan	100%	Japanese service company
ACE INA Marketing Group C.A.	Venezuela	100%	Venezuela, services & direct marketing
ACE INA Overseas Holdings, Inc.	USA (Delaware)	100%	Delaware, holding company
INACAN Holdings, Ltd.	Canada	100%	Canada, insurance holding
ACE INA Insurance	Canada	100%	Canada, insurance & reinsurance

24

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
ACE INA Life Insurance	Canada	100%	Canada, life insurance
ACE Insurance S.A.-N.V.	Belgium	99.9477% .0523% (AIIH)	Europe, insurance/reinsurance
ACE Insurance Company (EI# 66-0437305, NAIC #30953, PR)	Puerto Rico	100%	Puerto Rico, insurance
ACE Insurance Agency, Inc.	Puerto Rico	100%	Puerto Rico, general agent for ACE American Insurance Company
ACE Insurance Limited	Hong Kong	100%	Hong Kong, insurance
ACE Risk Management International Ltd. (formerly ACE INA Bermuda Insurance Managers Ltd.)	Bermuda	100%	Bermuda, management services for non-affiliates
DELPANAMA S.A.	Panama	100%	Panama, holding company
INAMEX S.A.	Mexico	100%	Mexico, reinsurance broker
Maritime General Ins. Company Ltd	Trinidad	8.06%	Trinidad insurance
Oriental Equity Holdings Limited	British Virgin Islands	100%	BVI, holding company
ACE Life Assurance Co. Ltd.	Thailand	25% 75% (Eksupsiri)	Thailand, life insurance
AFIA Finance Corporation	USA (Delaware)	100%	Delaware, insurance holding
AFIA Venezolana C.A.	Venezuela	100%	Venezuela, inactive claims & settling agent
ACE ICNA Italy Societa a Responsabilita Limitata	Italy	99.7% 0.3% (AIIH)	Italy, legal representative for CIGNA Insurance Company of Europe, S.A.-N.V.
Siam Liberty Company Limited	Thailand	49% (AFC) 45% (Nam EK)	Thailand, broker, surveyor & claims settling agency
ACE Servicios, S.A.	Argentina	100%	Argentina, service company
AFIA Finance Corp. Chile Limitada	Chile	98% 2% (AIIH)	Chile, claims & settling agent
Fire, Equity and General Insurance Company Limited	Nigeria	6.25%	Nigeria, insurance
Inversiones Continental S.A. de C.V.	Honduras	1.29%	Honduras, insurance holding

25

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
PT. ACE INA Insurance	Indonesia	80%	Indonesia, insurance
PT. Adi Citra Mandiri	Indonesia	45%	Indonesia, service company
RIYAD Insurance Co. Ltd.	Bermuda	80%	Bermuda, insurance
Safire Private Ltd.	Singapore	100%	Singapore, management & computer service bureau
AFIA (INA) Corporation, Limited	USA (Delaware)	100%	Delaware, holding company
AFIA	Unincorporated Association	60%	Association for international insurance
AFIA (ACE) Corporation, Limited	USA (Delaware)	100%	Delaware, holding company
AFIA	Unincorporated Association	40%	Association for international insurance
Compania Anonima de Seguros “AVILA”	Venezuela	0.6%	Venezuela, insurance
INAVEN, C.A. “Venezuela”	Venezuela	100%	Venezuela, corporation
La Positiva Compania Nacional de Seguros Sociedad Anonima	Peru	7.6869%	Peru, insurance
Reaseguradora Nuevo Mundo S.A.	Panama	3.7246%	Panama, reinsurance
Amazones Compania Anonima de Seguros	Ecuador	1.423%	Ecuador, insurance
ACE US Holdings, Inc.	USA (Delaware)	100%	USA, investment holding
ACE Financial Services International, Inc. (f/k/a ACE Financial Solutions International, Inc.)	USA (Delaware)	100%	USA, investment holding
ACE USA, Inc.	USA (Delaware)	100%	USA, investment holding
ASI Administrative Services Inc. (formerly ASI Administrative Services Holdings Inc. and CRC Creditor Resources Canada Ltd.)	Canada (Yukon)	100%	Canada, warranties business
Industrial Underwriters Insurance Company (EI# 75-6015738, NAIC# 21075, TX)	USA (Texas)	100%	USA, insurance
Rhea International Marketing (L), Inc.	Malaysia	60%	Malaysia, general services
Westchester Fire Insurance Company (EI# 13-5481330, NAIC# 21121, NY)	USA (New York)	100%	USA, Bermuda permit, insurance
Westchester Surplus Lines Insurance Company (EI# 58-2139927, NAIC #10172, GA)	USA (Georgia)	100%	USA, insurance
Westchester Specialty Services, Inc.	USA (Florida)	100%	USA, warranties

26

Name	Jurisdiction of Organization	Percentage Ownership	Jurisdictions in which Authorized and Type of Business
Westchester Specialty Insurance Services, Inc.	USA (Nevada)	100%	USA, insurance services, brokering, warranties
WDH Corporation	USA (Ohio)	80%	USA, insurance services
Dimension Service Corporation	USA (Ohio)	80%	USA, warranties
Dimension Holdings Inc.	USA (Ohio)	80%	USA, insurance services
ACE Financial Services Inc. (f/k/a Capital Re Corporation)	USA (Delaware)	100%	Delaware, insurance holding company
Capital RE LLC	Turks & Caicos	100%	Turks & Caicos, holding company
ACE (CR) Holdings	United Kingdom	100%	UK, holding co
ACE Capital VII Limited	United Kingdom	100%	UK, Lloyd’s capital vehicle
ACE (RGB) Holdings Limited	United Kingdom	100%	UK, holding company
ACE (CIDR) Limited	United Kingdom	100%	UK, Lloyd’s agency
Global Life Services Limited	United Kingdom	100%	UK, Lloyd’s agency
Ridge Underwriting Agencies Limited	United Kingdom	100%	UK, Lloyd’s agency
ACE Asset Management Inc.	Delaware	100%	DE, Bermuda permit corporation
ACE (Barbados) Holdings Limited	Barbados	100%	Barbados, holding company

27

SCHEDULE 5.02(A)

LIENS

1. Lien arising under a Subordination Agreement dated as of October 27, 1998 among ACE US Holdings, Inc., ACE Limited and The Chase Manhattan Bank encumbering ACE US Holdings, Inc.’s rights under the Subordinated Loan Agreement dated as of October 27, 1998 among ACE US Holdings, Inc., ACE Bermuda Insurance Ltd. and United States Trust Company of New York, as trustee under the Indenture dated October 27, 1998 of ACE US Holdings, Inc.

2. Liens securing the Fourth Amendment and Restatement of Letter of Credit Facility Agreement dated November 14, 2003 among ACE Limited, ACE Bermuda Insurance Ltd., certain other financial institutions and Citibank International plc, as Agent and Security Trustee.

EXHIBIT A

FORM OF ASSIGNMENT AND ACCEPTANCE

ASSIGNMENT AND ACCEPTANCE dated as of                 , 20          between                                      (the “Assignor”) and                                      (the “Assignee”), and [consented to and] accepted by Wachovia Bank, National Association, as administrative agent (the “Administrative Agent”)[, and ACE Limited (the “Parent”)].

W I T N E S S E T H

WHEREAS, this Assignment and Acceptance (the “Agreement”) relates to the Reimbursement Agreement dated as of September 22, 2004 among the Parent and other Account Parties party thereto, the Assignor and the other Banks party thereto, the Syndication Agent party thereto and the Administrative Agent, providing for a $850,000,000 unsecured letter of credit facility for the benefit of the Account Parties (as amended or otherwise modified from time to time, the “Reimbursement Agreement”);

WHEREAS, as provided under the Reimbursement Agreement, the Assignor has a commitment to participate in Letters of Credit and make Letter of Credit Advances to the Account Parties in an aggregate principal amount at any time outstanding not to exceed $                ;

WHEREAS, Letters of Credit with a total amount available for drawing thereunder of $                 are outstanding at the date hereof;

WHEREAS, Letter of Credit Advances made to the Account Parties by the Assignor under the Reimbursement Agreement in the aggregate principal amount of $                 are outstanding at the date hereof; and

WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Reimbursement Agreement and the other Loan Documents in respect of a portion of its LC Commitment Amount thereunder in an amount equal to $                 (the “Assigned Amount”), together with a corresponding portion of its outstanding Letter of Credit Participating Interest, Letter of Credit Participating Interest Commitment, LC Participation Obligations, Letter of Credit Exposure, and Letter of Credit Advances, if any, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows:

1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Reimbursement Agreement.

2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Reimbursement Agreement and the other Loan Documents to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Reimbursement Agreement to the extent of the Assigned Amount, including the outstanding Letter of Credit Participating Interest Commitment and Letter of Credit Exposure, and the amount of the Letter of Credit Advances, if any, outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee[, the Administrative Agent and the Parent] and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Reimbursement Agreement with an LC Commitment Amount (in addition to any LC Commitment Amount theretofore held by it) equal to the Assigned Amount, and (ii) the LC Commitment Amount of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor shall be released from its obligations under the Reimbursement Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor.

3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof the amount heretofore agreed between them.¹ It is understood that commitment and Letter of Credit fees accrued to the date hereof in respect of the Assigned Amount are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Reimbursement Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party’s interest therein and shall promptly pay the same to such other party.

4. [Consent of the Administrative Agent and the Parent. Pursuant to the Reimbursement Agreement, this Agreement is conditioned upon the consent of the Administrative Agent and, so long as no Default has occurred and is continuing, the Parent. The execution of this Agreement by the Administrative Agent and, if applicable, the Parent is evidence of this consent.]

5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition or statements of the Account Parties or any of their respective Subsidiaries, or the validity and enforceability of the obligations of the Account Parties or any of their respective Subsidiaries in respect of any Loan Document. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Account Parties and their respective Subsidiaries.

¹ Amount should combine the principal amount of any Letter of Credit Advances made by the Assignor together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum.

6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

[Remainder of page intentionally left blank.]

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written.

[ASSIGNOR]
By:
Title:
[ASSIGNEE]
By:
Title:
[ACE LIMITED]
By:
Title:
WACHOVIA BANK, NATIONAL ASSOCIATION, as Administrative Agent
By:
Title:	]

EXHIBIT C

FORM OF LETTER REGARDING EXISTING LETTERS OF CREDIT

September 22, 2004

Ladies and Gentlemen:

Please refer to the unsecured Reimbursement Agreement, dated as of September 22, 2004, among ACE Limited (“ACE Limited”), ACE Bermuda Insurance Ltd., ACE Tempest Life Reinsurance Ltd. and ACE Tempest Reinsurance Ltd., as Account Parties, the Banks party thereto, and Wachovia Bank, National Association, as an Issuing Bank and as Administrative Agent (the “Reimbursement Agreement”). Terms defined in the Reimbursement Agreement are, unless otherwise defined herein or the context otherwise requires, used herein as defined therein.

The Trustees confirm that upon the effectiveness of the Reimbursement Agreement, (a) the Insurance and Reinsurance Letters of Credit Agreement, dated as of November 20, 2003, issued by Barclays relating to the Lloyd’s Dollar Trust Funds of Syndicate 2488 (the “Existing Agreement”) shall terminate and be of no further force or effect (except that any provision of the Existing Agreement that by its terms survives termination thereof shall remain in full force and effect); and (b) each outstanding letter of credit issued for the account of the Trustees under the Existing Agreement shall be deemed to have been issued, and to be outstanding, for the joint account of the Trustees and ACE Limited under the Reimbursement Agreement (and shall constitute a “Letter of Credit” under and as defined therein).

Very truly yours,

for and on behalf of

Trustees of the Lloyd’s Dollar Trust Funds of Syndicate 2488

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Evan Greenberg, certify that:

1) I have reviewed this quarterly report on Form 10-Q of ACE Limited;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2004

/s/    Evan Greenberg

Evan Greenberg

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Philip V. Bancroft, certify that:

1) I have reviewed this quarterly report on Form 10-Q of ACE Limited;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2004

/s/    Philip V. Bancroft

Philip V. Bancroft

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned officer of ACE Limited (the “Corporation”) hereby certifies that the Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, fully complies with the applicable reporting requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a)) and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of ACE Limited.

Dated: November 9, 2004	/S/    EVAN GREENBERG
	Evan Greenberg President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned officer of ACE Limited (the “Corporation”) hereby certifies that the Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, fully complies with the applicable reporting requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a)) and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of ACE Limited.

Dated: November 9, 2004	/S/    PHILIP V. BANCROFT
	Philip V. Bancroft Chief Financial Officer