<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 8, 1996
------------
ACE LIMITED
- --------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Cayman Islands 1-11778 Not Applicable
- --------------------------------------------------------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
</TABLE>
The ACE Building
30 Woodbourne Avenue
Hamilton, Bermuda HM 08
- --------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including are code: (441) 295-5200
--------------
Not Applicable
- --------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
On June 8, 1996, ACE Limited (NYSE: ACL) ("ACE") sent a letter to Donald
Kramer, Co-Chairman of Tempest Reinsurance Company Limited ("Tempest"),
proposing an increase in the consideration to be paid to Tempest shareholders in
connection with its previously announced agreement to acquire Tempest.
On June 9, ACE issued a press release relating to the increased offer to
acquire Tempest.
Included as Exhibit 99.1 and 99.2 to this Current Report on Form 8-K is a
copy of the letter sent to Donald Kramer and the press release, respectively.
Item 7. Exhibits.
99.1 Letter, dated June 8, 1996, from Brian Duperreault, Chairman,
President and Chief Executive Officer of ACE Limited, to Donald
Kramer, Co-Chairman of Tempest Reinsurance Company Limited.
99.2 Press Release, dated June 9, 1996.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: June 10, 1996
ACE LIMITED
By: /s/ Christopher Z. Marshall
----------------------------
Christopher Z. Marshall
Executive Vice President and
Chief Financial Officer
3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page No.
- ------- ----------- ----------
<S> <C> <C>
99.1 Letter, dated June 8, 1996, from Brian Duperreault,
Chairman, President and Chief Executive Officer
of ACE Limited, to Donald Kramer, Co-Chairman of
Tempest Reinsurance Company Limited.
99.2 Press Release, dated June 9, 1996
</TABLE>
<PAGE>
EXHIBIT 99.1
[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
<PAGE>
EXHIBIT 99.2
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
<PAGE>
what IPC shares will be worth in four months, which is the earliest
the IPC transaction could be closed.
. 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:
<PAGE>
<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.
# # #
