19. Information provided in connection with outstanding debt of subsidiaries

The following tables present condensed consolidating financial information at December 31, 2011 and December 31, 2010, and for the years ended December 31, 2011, 2010, and 2009 for ACE Limited (the Parent Guarantor) and ACE INA Holdings, Inc. (the Subsidiary Issuer). The Subsidiary Issuer is an indirect 100 percent-owned subsidiary of the Parent Guarantor. Investments in subsidiaries are accounted for by the Parent Guarantor 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 Issuer. Condensed consolidating financial information of the Subsidiary Issuer is presented on a consolidated basis and consists principally of the net assets, results of operations, and cash flows of operating insurance company subsidiaries.

Condensed Consolidating Balance Sheet at December 31, 2011

(in millions of U.S. dollars)

ACE Limited
(Parent
Guarantor)

ACE INA
Holdings, Inc.
(Subsidiary
Issuer)

Other ACE
Limited
Subsidiaries and
Eliminations⁽¹⁾

Consolidating
Adjustments⁽²⁾

ACE Limited
Consolidated

Assets

Investments

28,848

26,795

–

55,676

Cash

106

382

126

–

614

Insurance and reinsurance balances receivable

–

3,944

443

–

4,387

Reinsurance recoverable on losses and loss expenses

–

17,146

(4,757

)

–

12,389

Reinsurance recoverable on policy benefits

–

941

(692

)

–

249

Value of business acquired

–

648

–

648

Goodwill and other intangible assets

–

4,280

551

–

4,831

Investments in subsidiaries

24,055

–

(24,055

)

–

Due from subsidiaries and affiliates, net

498

–

(498

)

–

Other assets

7,181

1,522

–

8,711

Total assets

24,700

63,370

23,988

(24,553

)

87,505

Liabilities

Unpaid losses and loss expenses

–

30,837

6,640

–

37,477

Unearned premiums

–

5,416

918

–

6,334

Future policy benefits

–

3,673

601

–

4,274

Due to subsidiaries and affiliates, net

–

316

182

(498

)

–

Short-term debt

–

850

401

–

1,251

Long-term debt

–

3,360

–

3,360

Trust preferred securities

–

309

–

309

Other liabilities

184

7,769

2,031

–

9,984

Total liabilities

184

52,530

10,773

(498

)

62,989

Total shareholders' equity

24,516

10,840

13,215

(24,055

)

24,516

Total liabilities and shareholders' equity

24,700

63,370

23,988

(24,553

)

87,505

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

⁽²⁾ Includes ACE Limited parent company eliminations.

Condensed Consolidating Balance Sheet at December 31, 2010


(in millions of U.S. dollars)	ACE Limited (Parent Guarantor)		ACE INA Holdings, Inc. (Subsidiary Issuer)		Other ACE Limited Subsidiaries and Eliminations⁽¹⁾			Consolidating Adjustments⁽²⁾			ACE Limited Consolidated
Assets
Investments	$	47	$	26,718	$	24,642		$	–		$	51,407
Cash⁽³⁾		308		573		(109	)		–			772
Insurance and reinsurance balances receivable		–		3,710		523			–			4,233
Reinsurance recoverable on losses and loss expenses		–		16,877		(4,006	)		–			12,871
Reinsurance recoverable on policy benefits		–		959		(678	)		–			281
Value of business acquired		–		634		–			–			634
Goodwill and other intangible assets		–		4,113		551			–			4,664
Investments in subsidiaries		22,529		–		–			(22,529	)		–
Due from subsidiaries and affiliates, net		564		–		–			(564	)		–
Other assets		14		7,045		1,434			–			8,493
Total assets	$	23,462	$	60,629	$	22,357		$	(23,093	)	$	83,355
Liabilities
Unpaid losses and loss expenses	$	–	$	30,430	$	6,961		$	–		$	37,391
Unearned premiums		–		5,379		951			–			6,330
Future policy benefits		–		2,495		611			–			3,106
Due to subsidiaries and affiliates, net		–		555		9			(564	)		–
Short-term debt		300		1,000		–			–			1,300
Long-term debt		–		3,358		–			–			3,358
Trust preferred securities		–		309		–			–			309
Other liabilities		188		7,394		1,005			–			8,587
Total liabilities		488		50,920		9,537			(564	)		60,381
Total shareholders' equity		22,974		9,709		12,820			(22,529	)		22,974
Total liabilities and shareholders' equity	$	23,462	$	60,629	$	22,357		$	(23,093	)	$	83,355

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

⁽²⁾ Includes ACE Limited parent company eliminations.

⁽³⁾ ACE maintains two notional multi-currency cash pools (Pools) with a third-party bank. At December 31, 2010, the cash balance of one or more entities was negative; however, the overall Pool balances were positive. Refer to Note 1 f) for additional information.

Condensed Consolidating Statement of Operations

For the year ended December 31, 2011

(in millions of U.S. dollars)

ACE Limited
(Parent
Guarantor)

ACE INA
Holdings, Inc.
(Subsidiary
Issuer)

Other ACE
Limited
Subsidiaries and
Eliminations⁽¹⁾

Consolidating
Adjustments⁽²⁾

ACE Limited
Consolidated

Net premiums written

–

9,081

6,291

–

15,372

Net premiums earned

–

9,082

6,305

–

15,387

Net investment income

1,096

1,144

–

2,242

Equity in earnings of subsidiaries

1,504

–

(1,504

)

–

Net realized gains (losses) including OTTI

)

(853

)

–

(795

)

Losses and loss expenses

–

5,889

3,631

–

9,520

Policy benefits

–

192

209

–

401

Policy acquisition costs and administrative expenses

2,520

1,910

–

4,499

Interest (income) expense

(37

)

267

–

250

Other (income) expense

(125

)

135

–

Income tax expense

422

–

506

Net income

1,585

815

689

(1,504

)

1,585

Condensed Consolidating Statement of Operations


For the year ended December 31, 2010 (in millions of U.S. dollars)	ACE Limited (Parent Guarantor)			ACE INA Holdings, Inc. (Subsidiary Issuer)		Other ACE Limited Subsidiaries and Eliminations⁽¹⁾		Consolidating Adjustments⁽²⁾			ACE Limited Consolidated
Net premiums written	$	–		$	8,195	$	5,513	$	–		$	13,708
Net premiums earned		–			7,940		5,564		–			13,504
Net investment income		1			1,011		1,058		–			2,070
Equity in earnings of subsidiaries		3,066			–		–		(3,066	)		–
Net realized gains (losses) including OTTI		(42	)		303		171		–			432
Losses and loss expenses		–			4,910		2,669		–			7,579
Policy benefits		–			148		209		–			357
Policy acquisition costs and administrative expenses		70			2,372		1,753		–			4,195
Interest (income) expense		(37	)		251		10		–			224
Other (income) expense		(123	)		95		12		–			(16	)
Income tax expense		7			447		105		–			559
Net income	$	3,108		$	1,031	$	2,035	$	(3,066	)	$	3,108

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

⁽²⁾ Includes ACE Limited parent company eliminations.

Condensed Consolidating Statement of Operations


For the year ended December 31, 2009 (in millions of U.S. dollars)	ACE Limited (Parent Guarantor)			ACE INA Holdings, Inc. (Subsidiary Issuer)		Other ACE Limited Subsidiaries and Eliminations⁽¹⁾			Consolidating Adjustments⁽²⁾			ACE Limited Consolidated
Net premiums written	$	–		$	7,407	$	5,892		$	–		$	13,299
Net premiums earned		–			7,411		5,829			–			13,240
Net investment income		1			1,003		1,027			–			2,031
Equity in earnings of subsidiaries		2,636			–		–			(2,636	)		–
Net realized gains (losses) including OTTI		(75	)		75		(196	)		–			(196	)
Losses and loss expenses		–			4,620		2,802			–			7,422
Policy benefits		–			84		241			–			325
Policy acquisition costs and administrative expenses		54			2,180		1,707			–			3,941
Interest (income) expense		(43	)		261		7			–			225
Other (income) expense		7			44		34			–			85
Income tax expense (benefit)		(5	)		395		138			–			528
Net income	$	2,549		$	905	$	1,731		$	(2,636	)	$	2,549

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

⁽²⁾ Includes ACE Limited parent company eliminations.

Condensed Consolidating Statement of Cash Flows

For the year ended December 31, 2011

(in millions of U.S. dollars)

ACE Limited
(Parent
Guarantor)

ACE INA
Holdings, Inc.
(Subsidiary
Issuer)

Other ACE
Limited
Subsidiaries and
Eliminations⁽¹⁾

Consolidating
Adjustments⁽²⁾

ACE Limited
Consolidated

Net cash flows from operating activities

762

1,053

2,395

(740

)

3,470

Cash flows from investing activities

Purchases of fixed maturities available for sale

–

(12,203

)

(12,375

)

–

(24,578

)

Purchases of fixed maturities held to maturity

–

(338

)

–

(340

)

Purchases of equity securities

–

(157

)

(152

)

–

(309

)

Sales of fixed maturities available for sale

9,718

8,244

–

17,971

Sales of equity securities

–

354

–

376

Maturities and redemptions of fixed maturities available for sale

–

1,784

1,936

–

3,720

Maturities and redemptions of fixed maturities held to maturity

–

933

346

–

1,279

Net derivative instruments settlements

)

(24

)

(40

)

–

(67

)

Capital contribution to subsidiaries

(385

)

–

385

–

Advances (to) from affiliates

–

(41

)

–

Acquisition of subsidiaries (net of cash acquired of $91)

–

(569

)

(37

)

–

(606

)

Other

–

(420

)

(62

)

–

(482

)

Net cash flows used for investing activities

(338

)

(922

)

(2,120

)

344

(3,036

)

Cash flows from financing activities

Dividends paid on Common Shares

(459

)

–

(459

)

Common Shares repurchased

–

(195

)

–

(195

)

Net proceeds from issuance (repayment) of short-term debt

(300

)

(150

)

400

–

(50

)

Proceeds from share-based compensation plans

133

–

133

Advances (to) from affiliates

–

(149

)

108

–

Dividends to parent company

–

(740

)

740

–

Capital contribution from parent

–

385

(385

)

–

Tax benefit on share-based compensation expense

–

Net cash flows used for financing activities

(626

)

(296

)

(39

)

396

(565

)

Effect of foreign currency rate changes on cash and cash equivalents

–

(26

)

–

(27

)

Net increase (decrease) in cash

(202

)

(191

)

235

–

(158

)

Cash – beginning of period⁽³⁾

308

573

(109

)

–

772

Cash – end of period

106

382

126

–

614

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

⁽²⁾ Includes ACE Limited parent company eliminations.

⁽³⁾ ACE maintains two notional multi-currency cash pools with a third-party bank. At December 31, 2010, the cash balance of one or more entities was negative; however, the overall notional multi-currency cash pool balances were positive. Refer to Note 1 f) for additional information.

Condensed Consolidating Statement of Cash Flows


For the year ended December 31, 2010 (in millions of U.S. dollars)	ACE Limited (Parent Guarantor)			ACE INA Holdings, Inc. (Subsidiary Issuer)			Other ACE Limited Subsidiaries and Eliminations⁽¹⁾			Consolidating Adjustments⁽²⁾			ACE Limited Consolidated
Net cash flows from operating activities	$	(176	)	$	1,798		$	2,124		$	(200	)	$	3,546
Cash flows from investing activities
Purchases of fixed maturities available for sale		(1	)		(13,785	)		(17,470	)		–			(31,256	)
Purchases of fixed maturities held to maturity		–			(615	)		(1	)		–			(616	)
Purchases of equity securities		–			(107	)		(687	)		–			(794	)
Sales of fixed maturities available for sale		–			10,225			14,054			–			24,279
Sales of equity securities		–			17			757			–			774
Maturities and redemptions of fixed maturities available for sale		–			1,845			1,815			–			3,660
Maturities and redemptions of fixed maturities held to maturity		–			1,142			211			–			1,353
Net derivative instruments settlements		(3	)		(10	)		(96	)		–			(109	)
Capital contribution to subsidiaries		(290	)		–			–			290			–
Advances (to) from affiliates		851			–			–			(851	)		–
Acquisition of subsidiaries (net of cash acquired of $80)		–			(1,139	)		–			–			(1,139	)
Other		–			(253	)		(80	)		–			(333	)
Net cash flows from (used for) investing activities		557			(2,680	)		(1,497	)		(561	)		(4,181	)
Cash flows from financing activities
Dividends paid on Common Shares		(435	)		–			–			–			(435	)
Common shares repurchased		–			–			(235	)		–			(235	)
Proceeds from share-based compensation plans		63			–			–			–			63
Net proceeds from issuance of short-term debt		300			841			–			–			1,141
Net proceeds from issuance of long-term debt		–			199			–			–			199
Advances (to) from affiliates		–			3			(854	)		851			–
Dividends to parent company		–			–			(200	)		200			–
Capital contribution from parent		–			–			290			(290	)		–
Tax expense on share-based compensation expense		–			–			(1	)		–			(1	)
Net cash flows from (used for) financing activities		(72	)		1,043			(1,000	)		761			732
Effect of foreign currency rate changes on cash and cash equivalents		–			12			(6	)		–			6
Net increase (decrease) in cash		309			173			(379	)		–			103
Cash – beginning of period⁽³⁾		(1	)		400			270			–			669
Cash – end of period⁽³⁾	$	308		$	573		$	(109	)	$	–		$	772

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

⁽²⁾ Includes ACE Limited parent company eliminations.

⁽³⁾ ACE maintains two notional multi-currency cash pools with a third-party bank. At December 31, 2010 and 2009, the cash balance of one or more entities was negative; however, the overall notional multi-currency cash pool balances were positive. Refer to Note 1 f) for additional information.

Condensed Consolidating Statement of Cash Flows


For the year ended December 31, 2009 (in millions of U.S. dollars)	ACE Limited (Parent Guarantor)			ACE INA Holdings, Inc. (Subsidiary Issuer)			Other ACE Limited Subsidiaries and Eliminations⁽¹⁾			Consolidating Adjustments⁽²⁾			ACE Limited Consolidated
Net cash flows from operating activities	$	594		$	1,888		$	1,203		$	(350	)	$	3,335
Cash flows from investing activities
Purchases of fixed maturities available for sale		–			(16,877	)		(20,383	)		–			(37,260	)
Purchases of fixed maturities held to maturity		–			(457	)		(15	)		–			(472	)
Purchases of equity securities		–			(186	)		(168	)		–			(354	)
Sales of fixed maturities available for sale		88			12,650			16,916			–			29,654
Sales of fixed maturities held to maturity		–			10			1			–			11
Sales of equity securities		–			544			728			–			1,272
Maturities and redemptions of fixed maturities available for sale		–			1,792			1,612			–			3,404
Maturities and redemptions of fixed maturities held to maturity		–			410			104			–			514
Net derivative instruments settlements		–			(6	)		(86	)		–			(92	)
Capital contribution to subsidiaries		(90	)		–			–			90			–
Advances (to) from affiliates		(174	)		–			–			174			–
Other		(4	)		(14	)		117			–			99
Net cash flows used for investing activities		(180	)		(2,134	)		(1,174	)		264			(3,224	)
Cash flows from financing activities
Dividends paid on Common Shares		(388	)		–			–			–			(388	)
Net repayment of short-term debt		–			(466	)		–			–			(466	)
Net proceeds from issuance of long-term debt		–			500			–			–			500
Proceeds from share-based compensation plans		25			–			–			–			25
Advances from (to) affiliates		–			156			18			(174	)		–
Dividends to parent company		–			–			(350	)		350			–
Capital contribution from parent		–			–			90			(90	)		–
Tax benefit on share-based compensation expense		–			6			2			–			8
Net cash flows from (used for) financing activities		(363	)		196			(240	)		86			(321	)
Effect of foreign currency rate changes on cash and cash equivalents		–			8			4			–			12
Net increase (decrease) in cash		51			(42	)		(207	)		–			(198	)
Cash – beginning of year⁽³⁾		(52	)		442			477			–			867
Cash – end of year⁽³⁾	$	(1	)	$	400		$	270		$	–		$	669

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

(2) Includes ACE Limited parent company eliminations.

⁽³⁾ ACE maintains two notional multi-currency cash pools with a third-party bank. At December 31, 2009, and 2008, the cash balance of one or more entities was negative; however, the overall notional multi-currency cash pool balances were positive. Refer to Note 1 f) for additional information.