ACE Limited Reports Fourth Quarter 2006 Net Income of $665 Million, Full Year 2006 Net Income of $2,305 Million; Record Operating Income of $2,351 Million and Earnings Per Share Of $7.05

Jan 30, 2007

HAMILTON, Bermuda--(BUSINESS WIRE)--ACE Limited (NYSE:ACE) today reported net income for the fourth quarter ended December 31, 2006 of $665 million or $1.99 per common share after payment of preferred dividends, compared with net income of $236 million or $0.69 per share for the same quarter last year. Income excluding net realized gains (losses) for the fourth quarter was $643 million, or $1.92 per share, compared with $244 million or $0.72 per share for the same quarter of last year.⁽¹⁾ The combined ratio for the current quarter was 88.2%. Annualized return on average equity for the quarter was 19%.⁽³⁾

Fourth Quarter Summary
(in millions, except per share amounts)
(Unaudited)
				(Per Share - Diluted)
	2006	2005	Change		2006	2005	Change

Net income	$ 665	$ 236	182%		$ 1.99	$ 0.69	188%
Net realized gains (losses), net of tax	22	(8)	-		0.07	(0.03)	-
Income excluding net realized gains (losses), net of tax ⁽¹⁾	$ 643	$ 244	164%		$ 1.92	$ 0.72	167%

Net income for the year increased to $2.3 billion or $6.91 per share, compared with $1 billion or $3.31 per share for 2005. For 2006, income excluding net realized gains and the cumulative effect of an accounting change⁽²⁾ was $2,351 million or $7.05 per share, compared with $955 million or $3.06 per share for 2005.⁽¹⁾The combined ratio for the year was 88.1%, compared with the combined ratio for 2005 of 99.5%. Return on average equity for the year was 18.5%.⁽³⁾

Years Ended
(in millions, except per share amounts)
(Unaudited)

				(Per Share - Diluted)
	2006	2005	Change		2006	2005	Change

Net income	$ 2,305	$ 1,028	124%		$ 6.91	$ 3.31	109%
Net realized gains (losses), net of tax	(50)	73	-		(0.15)	0.25	-
Cumulative effect, net of tax⁽²⁾	4	-	-		0.01	-	-
Income excluding net realized gains (losses) and cumulative effect, net of tax⁽¹⁾	$ 2,351	$ 955	146%		$ 7.05	$ 3.06	130%

Evan Greenberg, President and Chief Executive Officer of ACE Limited, commented: “The quarter was an excellent finish to an outstanding year. Book value grew by over 20% and our return on equity exceeded 18%. While market conditions continue to soften and we remain firmly committed to underwriting discipline, we are a large organization with a broad capability and tremendous geographic reach. This creates opportunity for growth without compromising our underwriting standards. We are well positioned to continue our growth in book value for the foreseeable future.”

Other operating highlights were as follows:

P&C net premiums written increased 9% over the prior year quarter (4% after adjusting for a transaction described below) and full year was 2%.
P&C net premiums earned increased 6% over the prior year quarter and full year was 0.4%.
The combined ratio was 88.1% for the year compared with 99.5% in 2005; for the quarter, the combined ratio was 88.2%.
P&C underwriting income was $1.4 billion for the full year and $347 million for the fourth quarter.
Operating cash flow amounted to $4.1 billion for the year and $804 million for the fourth quarter.
Invested assets increased by $4.8 billion or 15% during the year to $37.2 billion.
Net investment income increased 21% for the quarter and 27% for the year to $1.6 billion.
Shareholders’ equity increased 21% for the year to $14.3 billion.
Tangible equity⁽¹⁾ rose to $11.5 billion, an increase of 27% from year-end 2005.
Return on average equity for 2006 was 18.5%; excluding FAS 115, it was 19.2%.⁽³⁾

Prior to the fourth quarter of 2006 we presented a Financial Services segment. As this segment no longer represents a significant part of our operations, we no longer report it separately. We now report the financial solutions business of ACE Financial Solutions and ACE Financial Solutions International with the Insurance –North American segment. In addition, our share of the earnings from Assured Guaranty has been reported in our Corporate results.

Details of our financial results for our business segments are available in the financial supplement. Key segment items include:

Insurance-North American: Net premiums written increased 16% over the prior year quarter. Excluding one particularly large Risk Management account written in the quarter, growth was 5%. The combined ratio was 88.9%.
Insurance-Overseas General: Net premiums written increased 4% over the prior year quarter. The combined ratio was 87.4%.
Global Reinsurance: Net premiums written decreased 9% over the prior year quarter. The combined ratio was 74.7%.
Life Insurance and Reinsurance: Net premiums written increased 16% over the prior year quarter. Income excluding net realized gains (losses) increased 75% to $42 million over the prior year quarter.

Please refer to the ACE Limited Financial Supplement dated December 31, 2006, which is posted on the Company's website in the Investor Information section, and access Financial Reports for more detailed information on individual segment performance, together with additional disclosure on reinsurance recoverable, loss reserves, investment portfolio and capital structure. The URL reference is: http://media.corporate-ir.net/media_files/nys/ace/reports/fin_supp_dec ember_31_2006.xls. (Due to the length of this URL, it may be necessary to copy and paste this hyperlink into your Internet browser's URL address field.)

ACE will host its year-end, fourth quarter earnings conference call and webcast on Wednesday, January 31, 2007 beginning at 8:30 a.m. ET. The earnings conference call will be available via live and archived webcast atwww.acelimited.com. Please refer to the Investor Information section and access Calendar of Events for details. Alternatively, you may call 800-289-0572 (in the United States) or 913-981-5543 (international); passcode 9865344. A replay of the call will be available from approximately 11:30 a.m. ET on Wednesday, January 31, 2007 until Wednesday, February 28, 2007. To listen to the replay, dial: 888-203-1112 (in the United States) or 719-457-0820 (international); passcode 9865344.

The ACE Group of Companies is a global leader in insurance and reinsurance serving a diverse group of clients. Headed by ACE Limited, a component of the Standard & Poor’s 500 stock index, the ACE Group conducts its business on a worldwide basis with operating subsidiaries in more than 50 countries. Additional information can be found at: www.acelimited.com.

(1) Non-GAAP Financial Measures:

Operating Income or Income excluding net realized gains (losses) and

cumulative effect, net of tax is a common performance measurement for

insurance companies. We believe this presentation enhances the

understanding of our results of operations by highlighting the

underlying profitability of our insurance business. We exclude net

realized gains (losses) because the amount of these gains (losses)

is heavily influenced by, and fluctuates in part according to, the

availability of market opportunities. We exclude the cumulative

effect of a change in accounting principle net of tax because this

amount resulted in a one-time adjustment to income.

Underwriting income is calculated by subtracting losses and loss

expenses, life and annuity benefits, policy acquisition costs and

administrative expenses from net premiums earned. We use

underwriting income 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.

Tangible shareholders' equity is shareholders' equity less goodwill.

See reconciliation of Non-GAAP Financial Measures on page 25 in the

financial supplement.

These measures should not be viewed as a substitute for net income

determined in accordance with generally accepted accounting

principles (GAAP).

(2)The cumulative effect is a benefit resulting from the inclusion of

a forfeiture rate on restricted stock in our stock compensation

expense calculations, as required under Financial Accounting

Standard (FAS) 123R.

(3)Calculated using income excluding net realized gains (losses).

(4)Book value per ordinary share is ordinary shareholders' equity

divided by the shares outstanding.

Cautionary Statement Regarding Forward-Looking Statements:

Any forward-looking statements made in this press release reflect the Company’s current views with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties, which may cause actual results to differ materially from those set forth in these statements. For example, the Company’s forward-looking statements could be affected by competition, pricing and policy term trends, the levels of new and renewal business achieved, market acceptance, changes in demand, the frequency of unpredictable catastrophic events, actual loss experience, uncertainties in the reserving or settlement process, new theories of liability, judicial, legislative, regulatory and other governmental developments, litigation tactics and developments, investigation developments and actual settlement terms, the amount and timing of reinsurance recoverable, credit developments among reinsurers, actual market developments, rating agency action, possible terrorism or the outbreak and effects of war and economic, political, regulatory, insurance and reinsurance business conditions, as well as management’s response to these factors, and other factors identified in the Company’s filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

ACE Limited Summary Consolidated Balance Sheets (in millions of U.S. dollars, except per share data)
		December 31		December 31
		2006		2005
		(Unaudited)
Assets
Total investments	$	36,601	$	31,842
Cash		565		512
Insurance and reinsurance balances receivable		3,580		3,343
Reinsurance recoverable		14,580		15,463
Other assets		11,809		11,280
Total assets	$	67,135	$	62,440

Liabilities
Unpaid losses and loss expenses	$	35,517	$	35,055
Unearned premiums		6,437		5,884
Other liabilities		10,903		9,689
Total liabilities	$	52,857	$	50,628

Shareholders’ equity
Total shareholders’ equity	$	14,278	$	11,812
Total liabilities and shareholders’ equity	$	67,135	$	62,440

Book value per ordinary share⁽⁴⁾	$	42.03	$	34.81

ACE Limited Summary Consolidated Financial Data (in millions of U.S. dollars, except share, per share data, and ratios) (Unaudited)
		Three Months Ended December 31				Year Ended December 31

		2006		2005		2006		2005

Gross premiums written	$	4,010	$	3,794	$	17,401	$	16,811
Net premiums written		2,864		2,628		12,030		11,792
Net premiums earned		3,026		2,859		11,825		11,748

Losses and loss expenses		1,824		2,135		7,070		8,571
Life and annuity benefits		32		35		123		143
Policy acquisition costs		433		425		1,715		1,663
Administrative expenses		365		301		1,456		1,261
Underwriting income (loss)⁽¹⁾		372		(37)		1,461		110

Net investment income		428		354		1,601		1,264
Net realized gains (losses)		15		(25)		(98)		76
Interest expense		42		46		176		174
Other (income) expense		(16)		6		(35)		(25)
Income tax expense (benefit)		124		4		522		273
Cumulative effect, net of tax		-		-		4		-
Net income		665		236		2,305		1,028
Preference shares dividend		(12)		(12)		(45)		(45)
Net income available to holders of ordinary shares	$	653	$	224	$	2,260	$	983

Diluted earnings per share:
Income excluding net realized gains (losses) and cumulative effect⁽¹⁾		$1.92		$0.72		$7.05		$ 3.06
Net income		$1.99		$0.69		$6.91		$ 3.31

Weighted average diluted shares outstanding		328.4		323.4		327.2		297.3

Loss and loss expense ratio		61.8%		76.5%		61.2%		74.5%
Policy acquisition cost ratio		14.4%		14.9%		14.6%		14.2%
Administrative expense ratio		12.0%		10.5%		12.3%		10.8%
Combined ratio		88.2%		101.9%		88.1%		99.5%

Ratios exclude life insurance and reinsurance business

ACE Limited Consolidated Supplemental Segment Information (in millions of U.S. dollars) (Unaudited)
		Three Months Ended December 31				Year Ended December 31

		2006		2005		2006		2005

Gross Premiums Written

Insurance - North American	$	2,236	$	2,056	$	9,663	$	9,189
Insurance - Overseas General		1,441		1,388		5,897		5,775
Global Reinsurance		255		283		1,567		1,599
Life Insurance and Reinsurance		78		67		274		248
Total	$	4,010	$	3,794	$	17,401	$	16,811


Net Premiums Written

Insurance - North American	$	1,476	$	1,271	$	5,940	$	5,803
Insurance - Overseas General		1,059		1,014		4,266		4,195
Global Reinsurance		251		276		1,550		1,546
Life Insurance and Reinsurance		78		67		274		248
Total	$	2,864	$	2,628	$	12,030	$	11,792


Net Premiums Earned

Insurance - North American	$	1,471	$	1,349	$	5,719	$	5,730
Insurance - Overseas General		1,097		1,048		4,321		4,239
Global Reinsurance		380		395		1,511		1,531
Life Insurance and Reinsurance		78		67		274		248
Total	$	3,026	$	2,859	$	11,825	$	11,748


Income Excluding Net Realized Gains (Losses) and Cumulative Effect⁽¹⁾

Insurance - North American	$	304	$	163	$	1,132	$	661
Insurance - Overseas General		187		104		754		463
Global Reinsurance		148		(10)		536		(83)
Life Insurance and Reinsurance		42		24		138		100
Corporate		(38)		(37)		(209)		(186)
Total	$	643	$	244	$	2,351	$	955

Contact:

ACE Limited, Hamilton
Investor Contact:
Helen M. Wilson, 441-299-9283
helen.wilson@ace.bm
or
Media Contact:
Robert T. Grieves, 212-827-4444
robert.grieves@ace-ina.com