<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Section 240.14a-11(c) or Section 240.14a-
12
ACE Limited
(Name of Registrant as Specified In Its Charter)
ACE Limited
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(i)(3).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[X] Fee computed on table below per Exchange Act Rule 14a-5(i)(4) and 0-11.
1) Title of each class of securities to which transactions applies:
Ordinary Shares
2) Aggregate number of securities to which transactions applies:
18,181,818*
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. $33.00 per Ordinary Share*
* Pursuant to the terms of the transaction described in the Joint
Proxy Statement/Prospectus, ACE Limited will issue Ordinary
Shares having an aggregate market value (determined as described
in the Joint Proxy Statement/ Prospectus) of $600,000,000,
provided that the average closing price used in determining the
number of Ordinary Shares to be issued will not be less than
$33.00. The aggregate number of securities to which the
transaction applies and the per unit price have been calculated
assuming a $33.00 average closing price which would provide the
maximum number of Ordinary Shares issuable in the transaction.
4) Proposed maximum aggregate value of transaction: $600,000,000
5) Total Fee paid: $120,000
<PAGE>
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[ACE Letterhead]
June 8, 1996
Mr. Donald Kramer
Co-Chairman
Tempest Reinsurance Company Limited
14 Par-la-Ville Road
Hamilton HM 08 Bermuda
Dear Don:
On behalf of the Board of Directors of ACE Limited, I would like to take this
opportunity to state unequivocally our commitment to acquire Tempest, pursuant
to our existing amalgamation agreement as improved by the terms of this letter.
We have long felt that an ACE/Tempest combination provides superior value to
Tempest shareholders through ownership of stock in the combined entity. In
light of recent events, however, and in order to assure meeting our deadline for
shareholder approval of June 19, 1996, the Board of Directors of ACE Limited has
agreed to significantly increase the consideration to be paid to Tempest
shareholders. Specifically, we propose that the value of the consideration to
be received by Tempest shareholders be increased by approximately $50 million
through a pre-closing dividend plus an additional dividend of up to a maximum of
$50 million declared prior to closing if the price of ACE ordinary shares does
not trade at $49.00 per ordinary share or higher on any date from and including
June 10, 1996 to the date prior to the closing of the transaction. Computed as
of March 31, 1996, with these improvements, ACE's offer will be increased to
$743.9 million or $179.04 per Tempest common share.
We remain confident that the combination of ACE and Tempest is viewed as a very
positive transaction by all constituencies and is in the best interests of both
Tempest's and ACE's shareholders. ACE believes that the ACE/Tempest transaction
under our existing agreement provides Tempest's shareholders with superior
economic value compared to that provided by the proposal recently set forth by
IPC Holdings, Ltd. ("IPC") even without giving effect to the new proposals set
forth in this letter. Any such comparison must necessarily consider, among
other elements, the following critical factors:
. Value of ACE Ordinary Shares to be Issued - The ACE/Tempest transaction is
due to close, subject to shareholder approval, on or about June 19, 1996,
and thus the value of the ACE ordinary shares to be received by Tempest
shareholders is subject to much less uncertainty than that of IPC. The
value of the IPC shares to be issued under the IPC proposal is uncertain.
Because the IPC proposal contemplates a closing no earlier than the end of
September, nearly four months away, Tempest shareholders are subject to the
risks of substantial movements in the price of IPC shares, and a
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June 8, 1996
Mr. Donald Kramer
potential significant decrease in the value of the proposed IPC
consideration. The recent decline in the market price of IPC shares may
suggest that the market does not support the IPC proposal.
. Proximity of ACE/Tempest Closing Reduces Risk to Tempest Shareholders - Due
to the proximity of the closing, which should occur on or about June 19,
1996, the ACE/Tempest transaction is much less uncertain. During the
period prior to the proposed closing of the IPC transaction, which is at
least four months, Tempest and its shareholders would be exposed to a
number of business, financial and market uncertainties. As a portion of
the consideration to be paid by IPC is subject to Tempest's results for the
period between March 31, 1996 and the closing date, any adverse business,
financial or market developments could decrease the consideration to be
received by Tempest shareholders. This period encompasses the traditional
Atlantic hurricane season.
. Market Opportunity to Evaluate ACE/Tempest Transaction - The market has had
an opportunity to evaluate the ACE/Tempest transaction, including the
issuance of additional ACE ordinary shares, the effect of which ACE
believes was largely reflected in the market price of ACE's ordinary shares
which prevailed immediately prior to the announcement of the IPC proposal.
In addition, the ACE/Tempest transaction contemplates the issuance of ACE
ordinary shares representing less than 30% of the currently outstanding ACE
ordinary shares. The IPC proposal contemplates the issuance of a
substantial number of additional IPC shares. There is significant
uncertainty as to the effect of this issuance on the long-term market price
of the IPC shares.
. Firm Commitment by ACE Under Amalgamation Agreement - ACE and Tempest have
a definitive agreement providing for the combination of ACE and Tempest,
subject to shareholder approval, on or about June 19, 1996. The IPC
proposal is conditioned upon the termination of the ACE/Tempest agreement,
approval of a mutually satisfactory amalgamation agreement, due diligence
and the approval by the Board of Directors and shareholders of both Tempest
and IPC. Furthermore, in connection with its March 1996 initial public
offering, IPC agreed not to sell or contract to sell, without the written
consent of the underwriters in the initial public offering, any of its
common shares until early September. Therefore, even if Tempest's board
terminates the ACE agreement and the other conditions mentioned above are
met, Tempest may not have any other acquisition agreement for the
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June 8, 1996
Mr. Donald Kramer
purchase of Tempest shares. IPC could simply walk away or simply choose to
substantially alter the terms of its proposal at any time prior to its
signing of a definitive agreement.
. Agreement with General Re - General Re has agreed in writing to the
arrangements described in the ACE/Tempest joint proxy statement. IPC's bid
assumes an agreement with General Re regarding the repurchase of its
Tempest shares and options as well as the cancellation of agreements
between General Re and Tempest. We understand that there are no agreements
between IPC and General Re regarding these issues.
. ACE/Tempest Transaction Provides Opportunity for Growth - Because of the
different lines of business conducted by ACE and Tempest, we believe that
there are substantial opportunities for cross-selling and client additions.
IPC's claim that this combination would expand client relationships is
suspect. We believe there are substantial overlaps in IPC's and Tempest's
client base and that, because many clients limit the amount of reinsurance
placed with any single reinsurer, this overlap could result in a
significant loss of business.
. ACE Provides Tempest Shareholders with an Investment in a Diversified
Company -Under the ACE/Tempest transaction, Tempest shareholders would own
freely tradeable shares in a large, diversified international property and
casualty insurance company. Under the IPC proposal, Tempest shareholders
would own shares of an even more concentrated monoline property catastrophe
reinsurer than before.
To reiterate, in order to assure meeting the deadline of June 19, 1996 for
shareholder approval and to consummate our transaction as quickly as possible,
the Board of Directors of ACE has agreed to revise our existing agreement so as
to provide the following:
REMOVAL OF 42% LOSS RATIO PROVISION AND INCREASED CASH DIVIDEND
In order to increase the value received by Tempest shareholders (other than
General Re, which is discussed further below) in the ACE/Tempest transaction,
ACE proposes to remove the 42% loss ratio provision, and to provide Tempest
shareholders with an additional cash dividend prior to the closing date.
Computed as of March 31, 1996, these changes would result in additional
consideration to Tempest shareholders equal to approximately $50.4 million or
$12.13 per Tempest share. This amount will consist of
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June 8, 1996
Mr. Donald Kramer
$25.4 million or $6.11 per Tempest common share attributed to the removal of the
42% loss ratio provision and $25 million or $6.02 per Tempest common share
attributed to an additional pre-closing dividend which will reduce Tempest's
March 31, 1996 Net Asset Value to $475 million.
GUARANTEED VALUE CASH DIVIDEND
ACE further proposes to provide additional guaranteed value to Tempest
shareholders (other than General Re) of up to a maximum of $50 million dollars
or $12.04 per Tempest common share. Such value will be provided to Tempest
shareholders through the appreciation of ACE ordinary shares and/or in the form
of an additional cash dividend. Specifically, although the ACE ordinary shares
trade at approximately $45.00 at present, ACE believes that, with the removal of
the uncertainty regarding the closing of the ACE/Tempest combination, its
ordinary shares would trade at a level commensurate with the trading level which
prevailed immediately prior to IPC's announcement of its intention to acquire
Tempest. Based on an ACE ordinary share price of $49.00, for example, ACE's new
proposal provides Tempest shareholders with a total value of $743.9 million or
$179.04 per Tempest common share. In order to assure Tempest shareholders of
the receipt of such value, ACE proposes that Tempest declare a dividend in an
amount equal to the number of ACE ordinary shares to be issued in the
amalgamation multiplied by the difference between the highest price at which ACE
ordinary shares trade between and including June 10, 1996 and the day before the
closing and $49.00 (the "Guaranteed Value Cash Dividend"), assuming the issuance
of 13.3 million shares in the amalgamation. The Guaranteed Value Cash Dividend
is subject to a maximum value of $50 million and is limited to such amount that
will guarantee Tempest shareholders receive a maximum value of $743.9 million
consisting of cash dividends, including the Guaranteed Value Cash Dividend, and
ACE ordinary shares valued at the highest price at which ACE ordinary shares
trade between and including June 10, 1996 and the day before the closing.
The following chart summarizes the consideration payable per Tempest common
share to Tempest shareholders (other than General Re) under our revised proposal
and under the IPC proposal, demonstrating the superiority of our revised
proposal, including the Guaranteed Value Cash Dividend, across a range of ACE
ordinary share market prices:
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June 8, 1996
Mr. Donald Kramer
<TABLE>
<CAPTION>
ACE ACE IPC
----------------------- ----------------------- --------------------
(ASSUMING ORDINARY (ASSUMING ORDINARY
SHARE PRICE OF $45.25) SHARE PRICE OF $49.00)
<S> <C> <C> <C>
Dividend $ 21.79 $ 21.79 $ 22.60
Stock 145.21 157.25 80.58
Guaranteed Value Cash
Dividend 12.04 -- --
Cash -- -- 76.82
Deduction for payment of
Termination Fee -- -- (2.71)
------- ------- -------
Total $179.04 $179.04 $177.29
</TABLE>
AMENDMENT TO GENERAL RE AGREEMENT
In addition, ACE will consent to an amendment of Tempest's agreement with
General Re providing for an additional cash payment to General Re of $7.5
million, or $6.97 per Tempest common share held by General Re. This amount will
bring the consideration to be paid to General Re to a level commensurate with
the consideration to be paid Tempest shareholders prior to the payment of the
Guaranteed Value Cash Dividend. If Tempest's agreement with General Re is
amended, as mentioned above, ACE understands that Tempest's Net Asset Value will
be further reduced from $475 million to $467.5 million.
The dividends to Tempest Shareholders (excluding the Guaranteed Value Cash
Dividend) will be adjusted based on actual results between March 31, 1996 and
closing to result in a Net Asset Value of $467.5 million at closing if the
Tempest agreement with General Re is amended or $475 million otherwise. If the
Net Asset Value of Tempest (excluding the Guaranteed Value Cash Dividend) is
below this level at closing a respective adjustment of purchase price will
result.
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June 8, 1996
Mr. Donald Kramer
AMENDMENT OF THE RIGHT TO TERMINATE IF AVERAGE CLOSING PRICE ABOVE $49.00
ACE also proposes to amend the amalgamation agreement to remove the ability of
both parties to terminate the amalgamation agreement if the Average Closing
Price (as defined in the amalgamation agreement) is greater than $49.00.
ACE believes that the revised terms of its agreement, combined with the
certainty of a transaction with ACE and the diversification and liquidity
created by the ACE/Tempest transaction, provides Tempest's shareholders an offer
superior to that proposed by IPC. We have more than met any stated objection to
the ACE/Tempest transaction, namely adequacy of consideration, fair treatment of
all Tempest shareholders and immediate liquidity of the ACE ordinary shares.
Our offer is based on our respective organizations meeting the dates set for our
respective shareholder meetings on June 19, 1996, as previously contemplated.
In order to provide each of us with an adequate opportunity to give notice to
our shareholders of the revised terms of our agreement, we must receive
definitive acceptance of the revised terms of our agreement as set forth in this
letter by 5:00 p.m. (local Bermuda time) on Monday, June 10, 1996.
We look forward to closing our previously agreed upon transaction shortly. If
you or your directors have any questions regarding ACE's offer, please feel free
to call me.
Yours sincerely,
/s/ Brian Duperreault
Brian Duperreault
Chairman, President and
Chief Executive Officer
# # #
<PAGE>
FOR IMMEDIATE RELEASE Investor Contact: Helen M. Wilson
Investor Relations
ACE Limited
(441) 299-9283
ACE Limited Improves Bid To Acquire Tempest by $100 Million
-----------------------------------------------------------
HAMILTON, BERMUDA, June 9, 1996 -- ACE Limited (NYSE: ACL) announced today that
it has offered to increase by approximately $100 million the price it would pay
in connection with its previously announced agreement to acquire Tempest
Reinsurance Company Limited, a Bermuda-based property catastrophe reinsurer.
The improved ACE proposal provides Tempest shareholders (excluding General Re
Corporation) with $743.9 million in total value or $179.04 per Tempest common
share. Even before taking into account the strategic benefits of the
ACE/Tempest transaction, the improved ACE proposal represents a value superior
to that offered by IPC Holdings, Ltd. on June 3, 1996 of $736.6 million
(excluding the General Re component) or $177.29 per Tempest common share (as
shown in the table below). In addition, under the improved ACE proposal,
General Re, which previously entered into a separate agreement with Tempest to
sell its shares for $172.4 million would receive an additional $7.5 million.
Brian Duperreault, ACE's chairman, president and chief executive officer,
stated: "ACE believes that the revised terms of its proposal, combined with the
certainty of a transaction with ACE and the diversification and liquidity
created by the ACE/Tempest transaction, provides Tempest's shareholders with an
offer superior to that proposed by IPC. The ACE/Tempest transaction will
diversify ACE's overall risk profile and expand ACE's customer base. Most
importantly, the ACE/Tempest transaction remains significantly accretive to ACE
shareholders on both a book value per share and earnings per share basis."
ACE reiterated its belief that its transaction is superior to the proposal set
forth by IPC for, among other reasons, the following critical factors:
. GREATER CERTAINTY OF VALUE OF ACE ORDINARY SHARES.
Because ACE is scheduled to close its transaction in ten days, the
value of the ACE shares to be received is more certain--there is
significant uncertainty as to what IPC shares will be worth in four
months, which is the earliest the IPC transaction could be closed.
<PAGE>
. SIGNIFICANTLY REDUCED EXPOSURE TO BUSINESS RISK.
Because ACE has the ability to close its acquisition of Tempest in
approximately 10 days, Tempest shareholders have less exposure to
business, financial and market uncertainties -- the valuation of the
consideration in IPC's transaction could decrease as a result of
Tempest's results over the next four months, which include the
traditional Atlantic hurricane season.
. FAVORABLE MARKET REACTION TO ACE/TEMPEST TRANSACTION.
The market has had the opportunity to evaluate the ACE/Tempest
transaction -- there is significant uncertainty as to the effect of
the IPC proposal on the long-term market price of IPC shares.
. FIRM COMMITMENT BY ACE.
ACE is contractually bound to the Tempest transaction -- IPC is not in
a position to enter into a contract with Tempest before September
without the consent of the underwriters of its initial public
offering.
. BETTER STRATEGIC FIT.
The ACE/Tempest transaction provides Tempest shareholders with an
investment in a diversified company as opposed to a concentrated
monoline property catastrophe reinsurer.
Under the improved ACE proposal, the value of the consideration to be received
by Tempest shareholders would be increased by approximately $50 million through
a pre-closing dividend plus a Guaranteed Value Cash Dividend of up to a maximum
of $50 million if the price of ACE ordinary shares does not trade at $49.00 per
share or higher on any date from and including June 10, 1996 to the date prior
to the closing, calculated as the difference between the highest trading price
and $49.00 multiplied by approximately 13.3 million. The dividends to Tempest
shareholders (excluding the Guaranteed Value Cash Dividend) will be adjusted
based on actual results between March 31, 1996 and closing.
The following chart summarizes the consideration payable per Tempest common
share to Tempest shareholders (other than General Re) under the improved ACE
proposal, assuming an ACE ordinary share price of $45.25, and under the IPC
proposal. This chart demonstrates the superiority of the ACE proposal without
giving effect to the qualitative factors discussed above which further enhance
the value of the ACE/Tempest transaction:
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<TABLE>
<CAPTION>
ACE IPC
------- -------
<S> <C> <C>
Dividend $ 21.79 $ 22.60
Stock 145.21 -
Stock/Cash - 157.40
Guaranteed Value Cash 12.04 -
Dividend (cash plus increased
stock value)
Deduction for payment of
Termination Fee - (2.71)
------- -------
Total $179.04 $177.29
</TABLE>
In order to increase the value received by Tempest shareholders (other than
General Re), the ACE proposal removes the 42% loss ratio provision, and provides
Tempest shareholders with an additional cash dividend prior to the closing date
resulting in a lower net asset value at closing. ACE also has proposed
eliminating the ability to terminate the ACE/Tempest transaction if the Average
Closing Price (as defined in the amalgamation agreement) is greater than $49.00.
Mr. Duperreault stated that "ACE is committed to acquire Tempest and is
confident in its ability to close the transaction promptly."
On March 14, 1996, ACE and Tempest entered into an amalgamation agreement
pursuant to which Tempest would be acquired by ACE and the shareholders of
Tempest would receive ACE ordinary shares. On June 3, 1996, IPC Holdings, Ltd.,
a Bermuda-based property catastrophe reinsurer announced a proposal to acquire
Tempest. ACE and Tempest have set June 19, 1996 as the date of the shareholder
meetings to vote on matters related to the ACE/Tempest transaction.
The ACE group of companies specializes in catastrophe insurance for a diverse
group of international clients. ACE Limited's Bermuda subsidiaries are leading
providers of high level excess and directors and officers liability insurance,
and also provide satellite, aviation, excess property and financial lines
coverages. ACE owns a majority interest in Methuen Group Limited and provides
corporate capital to Lloyd's syndicates managed by Methuen's managing agency.
At March 31, 1996, ACE Limited had over $1.5 billion in shareholders' equity and
$3.5 billion in assets.
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