Segment information

ACE operates through the following business segments: Insurance – North American, Insurance – Overseas General, Global Reinsurance, and Life. These segments distribute their products through various forms of brokers, agencies, and direct marketing programs. All business segments have established relationships with reinsurance intermediaries.

The Insurance – North American segment comprises our operations in the U.S., Canada, and Bermuda. This segment includes the operations of ACE USA (including ACE Canada), ACE Commercial Risk Services, ACE Private Risk Services, ACE Westchester, ACE Agriculture, ACE Bermuda, and various run-off operations, including Brandywine. ACE USA is the North American retail operating division which provides a broad array of traditional and specialty P&C, A&H, and risk management products and services to a diverse group of commercial and non-commercial enterprises and consumers. ACE Commercial Risk Services addresses the insurance needs of small and mid-sized businesses in North America by delivering an array of specialty product solutions for targeted industries that lend themselves to technology-assisted underwriting. ACE Private Risk Services provides personal lines coverages for high net worth individuals and families in North America. ACE Westchester focuses on the North American wholesale distribution of excess and surplus lines property, casualty, environmental, professional liability and inland marine products. ACE Agriculture provides comprehensive Multiple Peril Crop Insurance, crop-hail and farm P&C insurance protection to customers in the U.S. and Canada through Rain and Hail as well as specialty P&C insurance coverages to Agribusiness customers through Penn Millers. ACE Bermuda provides commercial insurance products on an excess basis mainly to a global client base targeting Fortune 1000 companies and covering exposures that are generally low in frequency and high in severity. The run-off operations do not actively sell insurance products but are responsible for the management of certain existing policies and settlement of related claims.

The Insurance – Overseas General segment comprises ACE International, our global retail insurance operations, the wholesale insurance business of ACE Global Markets (AGM), and the international A&H business of Combined Insurance. ACE International is our retail business serving territories outside the U.S., Bermuda, and Canada, and maintains a presence in every major insurance market in the world and is organized geographically along product lines that provide dedicated underwriting focus to customers. ACE International has four regions of operations: ACE Europe, ACE Asia Pacific, ACE Far East, and ACE Latin America. Companies within the Insurance – Overseas General segment write a variety of insurance products including P&C, professional lines (directors and officers and errors and omissions), marine, energy, aviation, political risk, specialty consumer-oriented products, and A&H (principally accident and supplemental health). AGM, our London-based international specialty and excess and surplus lines business, includes Syndicate 2488, a wholly-owned ACE syndicate. AGM offers products through its parallel distribution network via ACE European Group Limited (AEGL) and Syndicate 2488. ACE provides funds at Lloyd's to support underwriting by Syndicate 2488, which is managed by ACE Underwriting Agencies Limited. AGM uses Syndicate 2488 to underwrite P&C business on a global basis through Lloyd's worldwide licenses. AGM uses AEGL to underwrite similar classes of business through its network of U.K. and European licenses, and in the U.S. where it is eligible to write excess and surplus lines business. The reinsurance operation of AGM is included in the Global Reinsurance segment. Combined Insurance distributes a wide range of supplemental A&H products.

The Global Reinsurance segment represents ACE's reinsurance operations comprising ACE Tempest Re Bermuda, ACE Tempest Re USA, ACE Tempest Re International, and ACE Tempest Re Canada. The Global Reinsurance segment also includes AGM's reinsurance operations. These divisions provide a broad range of traditional and specialty reinsurance products including property catastrophe, casualty, and property reinsurance coverages to a diverse array of primary P&C insurers.

The Life segment includes ACE's international life operations (ACE Life), ACE Tempest Life Re (ACE Life Re), and the North American supplemental A&H and life business of Combined Insurance. ACE Life provides a broad portfolio of protection and savings products including whole life, endowment plans, individual term life, group term life, group medical, personal accident, credit life, universal life and unit linked contracts through multiple distribution channels primarily in emerging markets, including Egypt, Hong Kong, Indonesia, South Korea, Taiwan, Thailand and Vietnam; also throughout Latin America, selectively in Europe, and China through a non-consolidated joint venture insurance company. ACE Life Re helps clients (ceding companies) manage mortality, morbidity, and lapse risks embedded in their books of business. ACE Life Re's core business is a Bermuda-based operation which provides reinsurance to primary life insurers, focusing on guarantees included in certain fixed and variable annuity products and also on more traditional mortality reinsurance protection. ACE Life Re's U.S.-based traditional life reinsurance operation was discontinued for new business in January 2010. Since 2007, ACE Life Re has not quoted on new opportunities in the variable annuity reinsurance marketplace. Combined Insurance distributes specialty supplemental A&H and life insurance products targeted to middle income consumers, businesses, and students through educational institutions in the U.S. and Canada.

Corporate and Other (Corporate) includes ACE Limited, ACE Group Management and Holdings Ltd., ACE INA Holdings, Inc., and intercompany eliminations. Losses and loss expenses arise in connection with the commutation of ceded reinsurance contracts that result from a differential between the consideration received from reinsurers and the related reduction of reinsurance recoverable, 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. ACE also eliminates the impact of intersegment loss portfolio transfer transactions which are not reflected in the results within the statements of operations by segment.

For segment reporting purposes, certain items have been presented in a different manner than in the consolidated financial statements. Management uses underwriting income as the main measure of segment performance. ACE calculates underwriting income by subtracting Losses and loss expenses, Policy benefits, Policy acquisition costs, and Administrative expenses from Net premiums earned. For the Life business, management also includes Net investment income and (Gains) losses from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP as components of underwriting income. For example, for the year ended December 31, 2012, Life underwriting income of $402 million includes Net investment income of $251 million and gains from fair value changes in separate account assets of $29 million.

Effective January 1, 2012, we reclassified prior years segment operating results in order to conform to certain organizational realignments. These realignments resulted in a transfer of operating revenue and underwriting results of our international direct-marketed and credit life businesses from the Insurance – Overseas General segment to the Life segment. These realignments have no impact on consolidated operating results; however, prior years segment operating results contained in this report have been adjusted to conform to the current year presentation.

The following tables present the operations by segment:

Statement of Operations by Segment



For the Year Ended December 31, 2012 (in millions of U.S. dollars)	Insurance – North American			Insurance – Overseas General		Global Reinsurance			Life			Corporate and Other			ACE Consolidated
Net premiums written	$	7,208		$	5,863	$	1,025		$	1,979		$	—		$	16,075
Net premiums earned	7,019			5,740		1,002			1,916			—			15,677
Losses and loss expenses	5,626			2,862		553			611			1			9,653
Policy benefits	—			—		—			521			—			521
Policy acquisition costs	586			1,353		172			334			1			2,446
Administrative expenses	601			935		51			328			181			2,096
Underwriting income (loss)	206			590		226			122			(183		)	961
Net investment income	1,091			521		290			251			28			2,181
Net realized gains (losses) including OTTI	42			103		6			(72		)	(1		)	78
Interest expense	12			5		4			12			217			250
Other (income) expense:
(Gains) losses from fair value changes in separate account assets	—			—		—			(29		)	—			(29		)
Other	(9		)	3		(15		)	25			19			23
Income tax expense (benefit)	200			133		15			58			(136		)	270
Net income (loss)	$	1,136		$	1,073	$	518		$	235		$	(256	)	$	2,706

Statement of Operations by Segment



For the Year Ended December 31, 2011 (in millions of U.S. dollars)	Insurance – North American		Insurance – Overseas General		Global Reinsurance			Life			Corporate and Other			ACE Consolidated
Net premiums written	$	6,851	$	5,629	$	979		$	1,913		$	—		$	15,372
Net premiums earned	6,911		5,614		1,003			1,859			—			15,387
Losses and loss expenses	5,276		3,029		621			593			1			9,520
Policy benefits	—		—		—			401			—			401
Policy acquisition costs	612		1,335		185			339			1			2,472
Administrative expenses	592		939		52			317			168			2,068
Underwriting income (loss)	431		311		145			209			(170		)	926
Net investment income	1,170		546		287			226			13			2,242
Net realized gains (losses) including OTTI	34		33		(50		)	(806		)	(6		)	(795		)
Interest expense	15		5		2			11			217			250
Other (income) expense
(Gains) losses from fair value changes in separate account assets	—		—		—			36			—			36
Other	5		—		(1		)	26			15			45
Income tax expense (benefit)	395		164		30			50			(137		)	502
Net income (loss)	$	1,220	$	721	$	351		$	(494	)	$	(258	)	$	1,540

Statement of Operations by Segment



For the Year Ended December 31, 2010 (in millions of U.S. dollars)	Insurance – North American			Insurance – Overseas General			Global Reinsurance			Life			Corporate and Other			ACE Consolidated
Net premiums written	$	5,797		$	5,189		$	1,075		$	1,647		$	—		$	13,708
Net premiums earned	5,651			5,153			1,071			1,629			—			13,504
Losses and loss expenses	3,918			2,615			518			528			—			7,579
Policy benefits	—			—			—			357			—			357
Policy acquisition costs	626			1,209			204			306			—			2,345
Administrative expenses	561			837			55			246			174			1,873
Underwriting income (loss)	546			492			294			192			(174		)	1,350
Net investment income	1,138			473			288			174			(3		)	2,070
Net realized gains (losses) including OTTI	417			123			93			(192		)	(9		)	432
Interest expense	9			1			—			3			211			224
Other (income) expense	(22		)	(13		)	(23		)	26			22			(10		)
Income tax expense (benefit)	435			171			42			59			(154)			553
Net income (loss)	$	1,679		$	929		$	656		$	86		$	(265	)	$	3,085

Underwriting assets are reviewed in total by management for purposes of decision-making. Other than goodwill, ACE does not allocate assets to its segments.

The following table presents net premiums earned for each segment by product:



(in millions of U.S. dollars)	Property & All Other		Casualty		Life, Accident & Health		ACE Consolidated
For the Year Ended December 31, 2012
Insurance – North American	$	3,242	$	3,406	$	371	$	7,019
Insurance – Overseas General	2,236		1,379		2,125		5,740
Global Reinsurance	495		507		—		1,002
Life	—		—		1,916		1,916
	$	5,973	$	5,292	$	4,412	$	15,677
For the Year Ended December 31, 2011
Insurance – North American	$	3,174	$	3,380	$	357	$	6,911
Insurance – Overseas General	2,080		1,415		2,119		5,614
Global Reinsurance	458		545		—		1,003
Life	—		—		1,859		1,859
	$	5,712	$	5,340	$	4,335	$	15,387
For the Year Ended December 31, 2010
Insurance – North American	$	1,578	$	3,777	$	296	$	5,651
Insurance – Overseas General	1,800		1,424		1,929		5,153
Global Reinsurance	520		551		—		1,071
Life	—		—		1,629		1,629
	$	3,898	$	5,752	$	3,854	$	13,504

The following table presents net premiums earned by geographic region. Allocations have been made on the basis of location of risk:



	North America				Asia Pacific/Far East		Latin America
Years Ended	North America		Europe		Asia Pacific/Far East		Latin America
2012	60	%	17	%	16	%	7	%
2011	61	%	18	%	14	%	7	%
2010	61	%	20	%	13	%	6	%