Shareholders' equity

12 Months Ended

Dec. 31, 2013

Stockholders' Equity Note [Abstract]

Shareholders' equity

Shareholders’ equity

a) Common Shares

All of ACE’s Common Shares are authorized under Swiss corporate law. Though the par value of Common Shares is stated in Swiss francs, ACE continues to use U.S. dollars as its reporting currency for preparing the consolidated financial statements. Under Swiss corporate law, we are generally prohibited from issuing Common Shares below their par value. If there were a need to raise common equity at a time when the trading price of ACE's Common Shares is below par value, we would need in advance to obtain shareholder approval to decrease the par value of the Common Shares.

At our May 2012 and 2013 Annual General Meetings, our shareholders approved a dividend for the following years, respectively, payable in four quarterly installments after the annual general meetings in the form of a distribution by way of a par value reduction. At the January 10, 2014 Extraordinary General Meeting, our shareholders approved a resolution to increase our quarterly dividend from $0.51 per share to $0.63 per share for the final two quarterly installments (made on January 31, 2014 and the payment to be made by the end of April 2014) that had been earlier approved at our 2013 annual general meeting. The $0.12 per share increase for each installment will be distributed from capital contribution reserves while the existing $0.51 per share will be distributed by way of a par value reduction.

Under Swiss corporate law, dividends, including distributions through a reduction in par value (par value reduction), must be stated in Swiss francs though dividend payments are made by ACE in U.S. dollars. Dividend distributions following ACE's redomestication to Switzerland have generally been made by way of par value reduction (under the methods approved by our shareholders at our Annual General Meetings) and had the effect of reducing par value per Common Share each time a dividend was distributed. In light of a January 1, 2011 Swiss tax law change, we may also issue dividends without subjecting them to withholding tax by way of distributions from capital contribution reserves (Additional paid-in capital), a subaccount of legal reserves, and paid out of free reserves (Retained earnings). We employed this method of dividends during portions of 2011 and 2012, and to effect our dividend increase that was approved by shareholders on January 10, 2014.

b) Shares issued, outstanding, authorized, and conditional

	Years Ended December 31
	2013		2012		2011
Shares issued, beginning of year	342,832,412		342,832,412		341,094,559
Exercise of stock options	—		—		1,737,853
Shares issued, end of year	342,832,412		342,832,412		342,832,412
Common Shares in treasury, end of year (at cost)	(3,038,477	)	(2,510,878	)	(5,905,136	)
Shares issued and outstanding, end of year	339,793,935		340,321,534		336,927,276
Common Shares issued to employee trust
Balance, beginning of year	(9,467	)	(9,467	)	(101,481	)
Shares redeemed	—		—		92,014
Balance, end of year	(9,467	)	(9,467	)	(9,467	)

Prior to August 2011, exercises of stock options were satisfied through newly issued shares. From August 2011 onward, exercises of stock options were satisfied through Common Shares in treasury. Other decreases in Common Shares in treasury are principally due to grants of restricted stock, and purchases under the Employee Stock Purchase Plan (ESPP). Increases in Common Shares in treasury are due to open market repurchases of Common Shares and the surrender of Common Shares to satisfy tax withholding obligations in connection with the vesting of restricted stock and the forfeiture of unvested restricted stock.

For the years ended December 31, 2013, 2012, and 2011, ACE repurchased 3,266,531 Common Shares, 100,000 Common Shares, and 2,058,860 Common Shares in a series of open market transactions, respectively. The cost of these shares, which were placed in treasury, totaled $290 million, $7 million, and $132 million for the years ended December 31, 2013, 2012, and 2011, respectively. ACE repurchased these Common Shares to partially offset potential dilution from the exercise of stock options and the granting of restricted stock under share-based compensation plans as well as part of an overall capital management strategy.

Common Shares issued to employee trust are issued by ACE to a rabbi trust for deferred compensation obligations as discussed in Note 11 f) below.

Authorized share capital for general purposes

The ACE Limited Board of Directors (Board) has shareholder-approved authority as set forth in the Articles of Association to increase for general purposes ACE's share capital from time to time through May 16, 2014, by the issuance of up to 140,000,000 fully paid up Common Shares, with a par value equal to the par value of ACE's Common Shares as set forth in the Articles of Association at the time of any such issuance.

Conditional share capital for bonds and similar debt instruments

The share capital of ACE may be increased through the issuance of a maximum of 33,000,000 fully paid up Common Shares (with a par value of CHF 27.04 as of December 31, 2013) through the exercise of conversion and/or option or warrant rights granted in connection with bonds, notes, or similar instruments, issued or to be issued by ACE, including convertible debt instruments.

Conditional share capital for employee benefit plans

The share capital of ACE may be increased through the issuance of a maximum of 25,410,929 fully paid up Common Shares (with a par value of CHF 27.04 as of December 31, 2013) in connection with the exercise of option rights granted to any employee of ACE, and any consultant, director, or other person providing services to ACE.

c) ACE Limited securities repurchase authorization

On November 21, 2013, the Board announced authorization of a share repurchase program of up to $2 billion of ACE's Common Shares through December 31, 2014.  This $2 billion authorization replaces the previous authorizations which had a remaining balance of $228 million and expired on December 31, 2013. Such repurchases may be made in the open market, in privately negotiated transactions, block trades, accelerated repurchases and/or through option or other forward transactions. At December 31, 2013, $1.94 billion in share repurchase authorization remained through December 31, 2014 pursuant to the Board authorization. For the period January 1, 2014 through February 27, 2014, ACE repurchased 3,437,082 Common Shares for a total of $326 million in a series of open market transactions. At February 27, 2014, $1.62 billion in share repurchase authorization remained through December 31, 2014.

d) General restrictions

The holders of the Common Shares are entitled to receive dividends as approved by the shareholders. Holders of Common Shares are allowed one vote per share provided that, if the controlled shares of any shareholder constitute ten percent or more of the outstanding Common Shares of ACE, only a fraction of the vote will be allowed so as not to exceed ten percent in aggregate. Entry of acquirers of Common Shares as shareholders with voting rights in the share register may be refused if it would confer voting rights with respect to ten percent or more of the registered share capital recorded in the commercial register.

e) Dividends

Refer to section a) above for a discussion on the methods of dividend payments. Dividend distributions on Common Shares amounted to CHF 1.85 ($2.02) per Common Share (paid through par value reductions), CHF 1.91 ($2.06) per Common Share (including par value reductions of CHF 1.38 per Common Share), and CHF 1.22 ($1.38) per Common Share (including a par value reduction of CHF 0.30 per Common Share) for the years ended December 31, 2013, 2012, and 2011, respectively. Par value reductions have been reflected as such through Common Shares in the consolidated statements of shareholders' equity. The par value per Common Share at December 31, 2013, was CHF 27.04.

f) Deferred compensation obligation

ACE maintains rabbi trusts for deferred compensation plans principally for employees and former directors. The shares issued by ACE to the rabbi trusts in connection with deferrals of share compensation are classified in shareholders' equity and accounted for at historical cost in a manner similar to Common Shares in treasury. These shares are recorded in Common Shares issued to employee trust and the obligations are recorded in Deferred compensation obligation in the consolidated balance sheets. Changes in the fair value of the shares underlying the obligations are recorded in Accounts payable, accrued expenses, and other liabilities in the consolidated balance sheets and the related expense or income is recorded in Administrative expenses in the consolidated statements of operations.

The rabbi trusts also hold other assets, such as fixed maturities, equity securities, and life insurance policies. The assets of the rabbi trusts are consolidated with ACE's assets in the consolidated balance sheets. Assets held by the trust and the associated obligations are reported at fair value in Other investments and Accounts payable, accrued expenses, and other liabilities, respectively, in the consolidated balance sheets, with changes in fair value reflected as a corresponding increase or decrease to Other (income) expense in the consolidated statements of operations. However, life insurance policies assets and obligations are reported at cash surrender value.