ACE Ltd. Restates 5 Years’ Results to Correct Finite Reinsurance Accounting

July 21, 2005

ACE Limited said it is today filing a Form 8-K restating its financial results for the years 2000 through 2004, as well as its results for each of the quarters in the years 2003 and 2004, and for the first quarter of 2005. The primary purpose of the restatement is to correct the accounting treatment for eight transactions in the “non-traditional products” or “finite risk” category.

The restatements are expected to increase shareholders’ equity by about $1 million. The company said that the cumulative impact of the restatement will boost first quarter shareholders’ equity by $13 million, while the remaining corrections will lower equity by $12 million.

ACE said the decision to make this restatement was based on the results of the company’s independent investigation and an internal re-evaluation of the accounting for certain transactions. ACE has also included in the restatement correction of certain unrelated errors of an immaterial nature.

Evan Greenberg, president and chief executive officer of ACE Limited, said his company’s review was part of an industry wide response to the questions about finite risk reinsurance raised by the Securities and Exchange Commission, the United States Attorney, the New York Attorney General and various state regulators. Investigators have questioned the use of some finite contracts and whether they have been used more to boost financials than to transfer risk.

He said ACE’s independnent auditors reviewed more than 100 finite risk transactions and raised questions about the accounting for a number of transactions. As a result, ACE believes that eight finite risk contracts were accounted for in an incorrect manner. Of these, seven did not meet the applicable risk transfer requirements of FAS 113, “Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts,” and should have been recorded as deposits. The remaining contract was an inter-company agreement which was not properly eliminated in consolidation. Each of these eight contracts originated prior to 2002. Two of them remain in effect; six are no longer in effect. Of the eight contracts, three involved ACE as buyer, three involved ACE as seller and two were betwe

“We have found accounting problems on a number of transactions and we regret that. We are fixing those problems. We have also put in place strict procedures to assure that this does not happen again.

“We have shared the results of our independent investigation with the authorities as those results have emerged. The governmental investigations will continue, however, and we will continue to respond to all appropriate regulatory inquiries. ACE’s own investigation is continuing as well and we expect it to be concluded by the time of the restatement.”

The company said that its investigation has not identified any instances of inappropriate conduct by current senior management of the company or by members of the board of directors.

Some of the contracts being restated involved written or oral agreements, understandings or discussions pertaining to risk expectations that were not factored into the accounting treatment at the time of origination. In certain instances, agreements of this sort reduced or eliminated the anticipated risk transfer upon which the original accounting was based and resulted in the present restatement.

ACE said it has established appropriate internal controls, both before and during the course of the investigation, to address these issues. These controls include the prohibition of so-called “buy-side” finite risk contract acquisition without approval of the chief executive officer of ACE Limited, and the issuance of extensive guidelines and restrictions pertaining to the accounting for and marketing of so-called “sell- side” finite risk contracts.

The ACE Group conducts its business on a worldwide basis with operating subsidiaries in more than 50 countries. Additional information can be found at:

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