11. Information provided in connection with outstanding debt of subsidiaries

The following tables present condensed consolidating financial information at June 30, 2012 and December 31, 2011, and for the three and six months ended June 30, 2012 and 2011, 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 June 30, 2012

(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	$36			$	29,670	$	27,975		$	—		$	57,681
Cash⁽³⁾		(30	)		508		139			—			617
Insurance and reinsurance balances receivable		—			4,409		576			—			4,985
Reinsurance recoverable on losses and loss expenses		—			16,432		(4,680	)		—			11,752
Reinsurance recoverable on policy benefits		—			1,181		(924	)		—			257
Value of business acquired		—			637		—			—			637
Goodwill and other intangible assets		—			4,274		552			—			4,826
Investments in subsidiaries		25,660			—		—			(25,660	)		—
Due from subsidiaries and affiliates, net		327			—		—			(327	)		—
Other assets		7			7,678		2,261			—			9,946

Total assets	$26,000			$	64,789	$	25,899		$	(25,987	)	$	90,701

Liabilities
Unpaid losses and loss expenses	$—			$	30,321	$	6,529		$	—		$	36,850
Unearned premiums		—			5,916		1,128			—			7,044
Future policy benefits		—			3,845		591			—			4,436
Due to subsidiaries and affiliates, net		—			604		(277	)		(327	)		—
Short-term debt		—			851		550			—			1,401
Long-term debt		—			3,360		—			—			3,360
Trust preferred securities		—			309		—			—			309
Other liabilities		238			8,255		3,046			—			11,539

Total liabilities		238			53,461		11,567			(327	)		64,939

Total shareholders’ equity		25,762			11,328		14,332			(25,660	)		25,762

Total liabilities and shareholders’ equity	$26,000			$	64,789	$	25,899		$	(25,987	)	$	90,701

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

⁽²⁾	Includes ACE Limited parent company eliminations.

⁽³⁾

ACE maintains two notional multicurrency cash pools (Pools) with a third-party bank. Various ACE entities participate in one or the other of the Pools, pursuant to which credit and debit balances in individual ACE accounts are translated daily into a single currency and pooled on a notional basis. Individual ACE entities are permitted to overdraw on their individual accounts provided the overall Pool balances do not fall below zero. At June 30, 2012, the cash balance of one or more entities was negative; however, the overall Pool balances were positive.

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	$33		$	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		—		676		—			—			676
Goodwill and other intangible assets		—		4,248		551			—			4,799
Investments in subsidiaries		23,871		—		—			(23,871	)		—
Due from subsidiaries and affiliates, net		498		—		—			(498	)		—
Other assets		8		7,018		1,505			—			8,531

Total assets	$24,516		$	63,203	$	23,971		$	(24,369	)	$	87,321

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		24,332		10,673		13,198			(23,871	)		24,332

Total liabilities and shareholders’ equity	$24,516		$	63,203	$	23,971		$	(24,369	)	$	87,321

⁽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 Three Months Ended June 30, 2012

(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	$	—		$	2,327	$	1,803		$	—		$	4,130
Net premiums earned		—			2,196		1,587			—			3,783
Net investment income		1			257		279			—			537
Equity in earnings of subsidiaries		301			—		—			(301	)		—
Net realized gains (losses) including OTTI		2			34		(430	)		—			(394	)
Losses and loss expenses		—			1,325		794			—			2,119
Policy benefits		—			54		48			—			102
Policy acquisition costs and administrative expenses		14			656		463			—			1,133
Interest (income) expense		(8	)		58		12			—			62
Other (income) expense		(33	)		9		58			—			34
Income tax expense		3			119		26			—			148

Net income	$	328		$	266	$	35		$	(301	)	$	328

Comprehensive income (loss)	$	457		$	323	$	(22	)	$	(301	)	$	457

Condensed Consolidating Statement of Operations

For the Three Months Ended June 30, 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	$	—		$	2,306	$	1,647		$	—		$	3,953
Net premiums earned		—			2,225		1,532			—			3,757
Net investment income		—			282		287			—			569
Equity in earnings of subsidiaries		566			—		—			(566	)		—
Net realized gains (losses) including OTTI		(1	)		17		(89	)		—			(73	)
Losses and loss expenses		—			1,438		788			—			2,226
Policy benefits		—			59		49			—			108
Policy acquisition costs and administrative expenses		18			620		492			—			1,130
Interest (income) expense		(10	)		66		6			—			62
Other (income) expense		(40	)		23		29			—			12
Income tax expense		3			109		9			—			121

Net income	$	594		$	209	$	357		$	(566	)	$	594

Comprehensive income	$	801		$	382	$	184		$	(566	)	$	801

⁽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 Six Months Ended June 30, 2012

(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	$	—		$	4,425	$	3,277		$	—		$	7,702
Net premiums earned		—			4,148		3,016			—			7,164
Net investment income		1			522		558			—			1,081
Equity in earnings of subsidiaries		1,229			—		—			(1,229	)		—
Net realized gains (losses) including OTTI		22			60		(216	)		—			(134	)
Losses and loss expenses		—			2,507		1,416			—			3,923
Policy benefits		—			140		109			—			249
Policy acquisition costs and administrative expenses		26			1,296		903			—			2,225
Interest (income) expense		(17	)		124		17			—			124
Other (income) expense		(63	)		34		60			—			31
Income tax expense		5			204		49			—			258

Net income	$	1,301		$	425	$	804		$	(1,229	)	$	1,301

Comprehensive income	$	1,728		$	610	$	619		$	(1,229	)	$	1,728

Condensed Consolidating Statement of Operations

For the Six Months Ended June 30, 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	$	—		$	4,329	$	3,070		$	—		$	7,399
Net premiums earned		—			4,163		2,903			—			7,066
Net investment income		1			544		568			—			1,113
Equity in earnings of subsidiaries		805			—		—			(805	)		—
Net realized gains (losses) including OTTI		(2	)		4		(120	)		—			(118	)
Losses and loss expenses		—			2,739		1,750			—			4,489
Policy benefits		—			99		100			—			199
Policy acquisition costs and administrative expenses		36			1,208		944			—			2,188
Interest (income) expense		(18	)		133		10			—			125
Other (income) expense		(62	)		36		25			—			(1	)
Income tax expense		4			177		36			—			217

Net income	$	844		$	319	$	486		$	(805	)	$	844

Comprehensive income	$	1,239		$	592	$	213		$	(805	)	$	1,239

⁽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 Six Months Ended June 30, 2012

(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	$	49		$	540		$	794		$	—		$	1,383

Cash flows from investing activities
Purchases of fixed maturities available for sale		—			(5,614	)		(6,073	)		—			(11,687	)
Purchases of fixed maturities held to maturity		—			(134	)		(2	)		—			(136	)
Purchases of equity securities		—			(57	)		(36	)		—			(93	)
Sales of fixed maturities available for sale		—			3,750			4,282			—			8,032
Sales of equity securities		—			28			5			—			33
Maturities and redemptions of fixed maturities available for sale		—			1,158			1,122			—			2,280
Maturities and redemptions of fixed maturities held to maturity		—			527			212			—			739
Net derivative instruments settlements		(1	)		(6	)		(126	)		—			(133	)
Advances from (to) affiliates		131			—			—			(131	)		—
Acquisition of subsidiaries		—			(30	)		—			—			(30	)
Capital contribution to subsidiary		—			—			(90	)		90			—
Other		—			(140	)		(115	)		—			(255	)

Net cash flows from (used for) investing activities		130			(518	)		(821	)		(41	)		(1,250	)

Cash flows from financing activities
Dividends paid on Common Shares		(318	)		—			—			—			(318	)
Common Shares repurchased		—			—			(11	)		—			(11	)
Net proceeds from issuance of short-term debt		—			—			151			—			151
Proceeds from share-based compensation plans		3			—			52			—			55
Advances (to) from affiliates		—			23			(154	)		131			—
Capital contribution from subsidiary		—			90			—			(90	)		—

Net cash flows (used for) from financing activities		(315	)		113			38			41			(123	)

Effect of foreign currency rate changes on cash and cash equivalents		—			(9	)		2			—			(7	)

Net increase (decrease) in cash		(136	)		126			13			—			3
Cash – beginning of period		106			382			126			—			614

Cash – end of period⁽³⁾	$(30)			$	508		$	139		$	—		$	617

⁽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. Various ACE entities participate in one or the other of the Pools, pursuant to which credit and debit balances in individual ACE accounts are translated daily into a single currency and pooled on a notional basis. Individual ACE entities are permitted to overdraw on their individual accounts provided the overall Pool balances do not fall below zero. At June 30, 2012 one or more entities was negative; however, the overall Pool balances were positive.

Condensed Consolidating Statement of Cash Flows

For the Six Months Ended June 30, 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	$	623		$	677		$	1,443		$	(680	)	$	2,063

Cash flows from investing activities
Purchases of fixed maturities available for sale		—			(6,330	)		(7,353	)		—			(13,683	)
Purchases of fixed maturities held to maturity		—			(233	)		(1	)		—			(234	)
Purchases of equity securities		—			(138	)		(32	)		—			(170	)
Sales of fixed maturities available for sale		8			5,022			4,955			—			9,985
Sales of equity securities		—			332			15			—			347
Maturities and redemptions of fixed maturities available for sale		—			847			911			—			1,758
Maturities and redemptions of fixed maturities held to maturity		—			475			181			—			656
Net derivative instruments settlements		(1	)		(7	)		(38	)		—			(46	)
Capital contribution to subsidiary		(385	)		—			—			385			—
Advances from (to) affiliates		(291	)		—			—			291			—
Acquisition of subsidiaries (net of cash acquired of $95)		—			(343	)		(37	)		—			(380	)
Other		—			(449	)		317			—			(132	)

Net cash flows used for investing activities		(669	)		(824	)		(1,082	)		676			(1,899	)

Cash flows from financing activities
Dividends paid on Common Shares		(223	)		—			—			—			(223	)
Common Shares repurchased		—			—			(68	)		—			(68	)
Net proceeds from (repayments) issuance of short-term debt		(300	)		—			400			—			100
Proceeds from share-based compensation plans		76			—			—			—			76
Advances from (to) affiliates		—			226			65			(291	)		—
Dividends to parent company		—			—			(680	)		680			—
Capital contribution from parent		—			—			385			(385	)		—

Net cash flows (used for) from financing activities		(447	)		226			102			4			(115	)

Effect of foreign currency rate changes on cash and cash equivalents		—			12			—			—			12

Net (decrease) increase in cash		(493	)		91			463			—			61
Cash – beginning of period⁽³⁾		308			573			(109	)		—			772

Cash – end of period⁽³⁾	$(185)			$	664		$	354		$	—		$	833

⁽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. Various ACE entities participate in one or the other of the Pools, pursuant to which credit and debit balances in individual ACE accounts are translated daily into a single currency and pooled on a notional basis. Individual ACE entities are permitted to overdraw on their individual accounts provided the overall Pool balances do not fall below zero. At June 30, 2011 and December 31, 2010, the cash balance of one or more entities was negative; however, the overall Pool balances were positive.