<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to (S)240.14a-11(c) or (S)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):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rule 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transactions applies:
2) Aggregate number of securities to which transactions applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined).
4) Proposed maximum aggregate value of transaction:
5) Total Fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] 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>
LOGO
NOTICE OF ANNUAL GENERAL MEETING
23 December 1997
Hamilton, Bermuda
TO THE SHAREHOLDERS OF ACE LIMITED:
The Annual General Meeting of ACE Limited (the "Company") will be held on
Friday, 6 February 1998, at 9:00 a.m. at the Princess Hotel, Pembroke,
Bermuda, for the following purposes:
1. To elect one director to hold office until 2000 and six directors to
hold office until 2001;
2. To consider and vote upon a special resolution (which is attached as
Exhibit A to the accompanying Proxy Statement) to amend Article Six of
the Company's Memorandum of Association and Article 4(a) of the
Company's Amended and Restated Articles of Association (the "Articles")
to decrease the Company's authorized share capital to U.S.$22,500,000,
divided into 300,000,000 Ordinary Shares, par value of U.S.$0.041666667
per share, and 10,000,000 other Shares, par value of U.S.$1.00 per
share, and to effect a three-for-one stock split of the Company's
Ordinary Shares,
3. To consider and vote upon a special resolution (which is attached as
Exhibit B to the accompanying Proxy Statement) to amend Article 33 of
the Company's Articles to clarify the setting of record dates in respect
of shareholder meetings and payments of dividends.
4. To ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent accountants for the fiscal year ending 30 September 1998;
and
5. To transact such other further business, if any, as lawfully may be
brought before the meeting.
Only shareholders of record, as shown by the transfer books of the Company,
at the close of business on 13 December 1997 are entitled to notice of, and to
vote at, the Annual General Meeting.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE RETURN ENVELOPE
FURNISHED FOR THAT PURPOSE, AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY
REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT.
FOR FURTHER INFORMATION CONCERNING THE INDIVIDUALS NOMINATED AS DIRECTORS, USE
OF THE PROXY AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE PROXY
STATEMENT ON THE FOLLOWING PAGES.
By Order of the Board of Directors,
Brian Duperreault,
Chairman, President and Chief
Executive Officer
<PAGE>
ACE LIMITED
THE ACE BUILDING
30 WOODBOURNE AVENUE
HAMILTON HM 08 BERMUDA
23 DECEMBER 1997
PROXY STATEMENT
The Board of Directors of ACE Limited (the "Company") is soliciting the
accompanying proxy to be voted at the Annual General Meeting of the Company to
be held at 9:00 a.m. on Friday, 6 February 1998, at the Princess Hotel, 76
Pitts Bay Road, Pembroke, Bermuda, and any adjournments thereof. When the
proxy is properly executed and returned, the Ordinary Shares it represents
will, subject to any direction to the contrary, be voted at the meeting in
favor of the matters specified in the "Notice of Annual General Meeting"
attached hereto.
Any shareholder giving a proxy may revoke it prior to its exercise by
providing the Secretary of the Company with written notice of revocation, by
voting in person at the Annual General Meeting or by executing a later-dated
proxy; provided, however, that the action is taken in sufficient time to
permit the necessary examination and tabulation of the subsequent proxy or
revocation before the vote is taken.
Shareholders of record as of the close of business on 13 December 1997 will
be entitled to vote at the meeting. As of the close of business on 13 December
1997, there were outstanding 54,519,540 Ordinary Shares of the Company
entitled to vote at the meeting, with each Ordinary Share entitling the holder
of record on such date to one vote (except that if, and so long as, the
Controlled Shares (defined generally to include all shares of the Company
directly, indirectly or constructively owned or beneficially owned by any
person or group of persons) of any person constitute 10% or more of the issued
Ordinary Shares, the voting rights with respect to the Controlled Shares owned
by such person shall be limited, in the aggregate, to a voting power of
approximately 10%, pursuant to a formula specified in the Company's Amended
and Restated Articles of Association (the "Articles").
The election of each nominee for director and the ratification of the
appointment of Coopers & Lybrand L.L.P. require the affirmative vote of a
majority of the votes cast at the Annual General Meeting, provided there is a
quorum (consisting of not less than six shareholders present in person or by
proxy holding at least 50% of the issued and outstanding shares entitled to
vote at the Annual General Meeting). The proposal (the "Stock Split Proposal")
to amend the Company's Memorandum of Association (the "Memorandum") and the
Articles to decrease the Company's authorized share capital and to effect a
three-for-one stock split of the Company's Ordinary Shares and the proposal
(the "Record Date Proposal") to amend the Company's Articles to clarify the
setting of record dates in respect of shareholder meetings and payments of
dividends require the affirmative vote of the holders of not less than two-
thirds of the Ordinary Shares entitled to vote thereon. The Company will
appoint one or more inspectors of election to count votes cast in person or by
proxy. Ordinary Shares owned by shareholders electing to abstain from voting
with respect to any proposal will be counted towards the presence of a quorum
but will have the effect of a vote against such proposal. "Broker non-votes"
will be counted towards the presence of a quorum but will not be considered
present and voting with respect to elections of directors or other matters to
be voted upon at the Annual General Meeting. Therefore, "broker non-votes"
will have no effect on the outcome of the proposals to elect directors or
ratify the appointment of the Company's independent accountants; "broker non-
votes" will have the effect of a vote against the proposals to amend the
Company's Memorandum and Articles.
A copy of the Company's Annual Report to Shareholders for the fiscal year
ended 30 September 1997 accompanies this Proxy Statement.
This Proxy Statement, the attached Notice of Annual General Meeting and the
accompanying proxy card are first being mailed to shareholders on or about 24
December 1997.
Other than the approval of the minutes of the 1997 Annual General Meeting,
the Company knows of no specific matter to be brought before the Annual
General Meeting which is not referred to in the attached Notice of Annual
General Meeting. If any such matter comes before the meeting, including any
shareholder proposal properly made, the proxy holders will vote proxies in
accordance with their judgment.
<PAGE>
ELECTION OF DIRECTORS
(ITEM A ON PROXY CARD)
The Company's Articles provide that the Company's Board of Directors shall
be divided into three classes with the terms of office of each class ending in
successive years. The Company's Articles provide for a maximum of 20 directors
and empower the Board of Directors to fix the exact number of directors and
appoint persons to fill any vacancies on the Board until the next Annual
General Meeting. The Board of Directors has set the number of directors at 16.
The Executive Committee of the Company's Board of Directors has nominated
Thomas J. Neff for election as a director of the Company to serve a two-year
term to expire at the Annual General Meeting in 2000 and until his successor
shall have been elected and shall have qualified. The Executive Committee of
the Company's Board of Directors has also nominated Brian Duperreault, Robert
M. Hernandez, Peter Menikoff, Glen M. Renfrew, Robert Ripp and Dermot F.
Smurfit for election as directors of the Company to serve three-year terms to
expire at the Annual General Meeting in 2001 and until their respective
successors shall have been elected and shall have qualified. Each of these
individuals is currently serving as a director of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THESE NOMINEES
AS DIRECTORS OF THE COMPANY.
It is the intention of the persons named as proxies, subject to any
direction to the contrary, to vote in favor of the candidates nominated by the
Board of Directors. If any one or more of the nominees is unable or unwilling
to serve, the proxies will, subject to any direction to the contrary, be voted
for such other person or persons as the Board of Directors may recommend.
Certain information with respect to the nominees for election as directors
proposed by the Company and the other directors whose terms of office as
directors will continue after the Annual General Meeting is set forth below.
NOMINEE FOR ELECTION TO TERM EXPIRING IN 2000
Thomas J. Neff, age 60, has been a director of the Company since May 1997.
Mr. Neff has been with Spencer Stuart & Associates, N.A. ("Spencer Stuart")
(executive search) since 1976 serving as President of Spencer Stuart from 1979
to 1996. Since 1996, Mr. Neff has served as chairman of Spencer Stuart U.S.
Mr. Neff is a director of various mutual funds managed by Lord, Abbett & Co.
NOMINEES FOR ELECTION TO TERMS EXPIRING IN 2001
Brian Duperreault, age 50, has been a director and Chairman, President and
Chief Executive Officer of the Company since October 1994. Prior to joining
the Company, Mr. Duperreault had been employed with American International
Group Inc. ("AIG") (insurance) since 1973 and served in various senior
executive positions with AIG and its affiliates from 1978 until September
1994, most recently as Executive Vice President, Foreign General Insurance
and, concurrently, as Chairman and Chief Executive Officer of American
International Underwriters Inc., a subsidiary of AIG, from April 1994 to
September 1994. Mr. Duperreault was President of American International
Underwriters Inc. from 1991 to April 1994, and chief executive officer of AIG
affiliates in Japan and Korea from 1989 until 1991. Mr. Duperreault serves as
director of the Bank of N.T. Butterfield (Bermuda).
Robert M. Hernandez, age 53, has been a director of the Company since
September 1985. Mr. Hernandez has served as Vice Chairman and Chief Financial
Officer of USX Corporation ("USX") (a diversified company) since December
1994, as Executive Vice President--Accounting & Finance and Chief Financial
Officer of USX from November 1991 until November 1994 and as Senior Vice
President--Finance & Treasurer from October 1990 to October 1991. Mr.
Hernandez is a director and chairman of RMI Titanium Company; a director of
Marinette Marine Corporation, Transtar, Inc. and USX; a trustee of the Compass
Capital Funds; a member of the boards of trustees of the Allegheny Health,
Education and Research Foundation and of Allegheny General Hospital; a
director of the Pennsylvania Chamber of Business and Industry; and a member of
the Pennsylvania Business Roundtable.
2
<PAGE>
Peter Menikoff, age 56, has been a director of the Company since January
1986. Mr. Menikoff has served as President and Chief Executive Officer of
CONEMSCO, Inc. (oil and gas drilling/production supplies, services and
equipment) since April 1997. Previously, Mr. Menikoff served as Executive Vice
President and Chief Administrative Officer of Tenneco Energy Resources
Corporation (energy) since June 1995. Mr. Menikoff served as a Senior Vice
President of Tenneco, Inc. (diversified industrial) from June 1994 until April
1997. Mr. Menikoff served as Executive Vice President of Case Corporation
(agricultural and construction equipment), a subsidiary of Tenneco, Inc., from
November 1991 to June 1994. Mr. Menikoff served as Treasurer of Tenneco, Inc.
from May 1989 to November 1991. Mr. Menikoff is a director of CONEMSCO, Inc.
Glen M. Renfrew, age 69, has been a director of the Company since August
1993. Mr. Renfrew retired as Managing Director and Chief Executive Officer of
Reuters Holdings plc (communications) in March 1991, having served in such
capacity since 1981. Mr. Renfrew is a director of Shorewood (Bermuda) Ltd.,
Lolla Ltd. and Bluesurf Ltd.
Robert Ripp, age 56, has been a director of the Company since December 1989.
Mr. Ripp has served as Vice President and Chief Financial Officer of AMP
Incorporated (electrical connectors) since July 1994. Mr. Ripp served as Vice
President and Treasurer of International Business Machines Corporation
(electronic computer equipment) from July 1989 through September 1993. Mr.
Ripp is a director of Network Imaging Corp.
Dermot F. Smurfit, age 53, has been a director of the Company since August
1997. Mr. Smurfit has been Joint Deputy Chairman of Jefferson Smurfit Group
plc ("Jefferson Smurfit") (paper, paperboard and packaging) since January
1984, Chairman and Chief Executive of Jefferson Smurfit's continental European
operations since 1992 and has held a number of other senior positions with
Jefferson Smurfit. Mr. Smurfit is also a member of the Board of the
Confederation of European Paper Industries. Mr. Smurfit is a director of Aon
Groepe Nederland and of Jefferson Smurfit.
DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THIS MEETING
Directors Whose Terms Expire in 1999
Jeffrey W. Greenberg, age 46, has been a director of the Company since
November 1995. Mr. Greenberg has served as Chairman and Chief Executive
Officer of Marsh & McLennan Risk Capital Corp. ("MMRC") (insurance), a wholly
owned subsidiary of Marsh & McLennan Companies, Inc. ("Marsh & McLennan")
since April 1996 and as a partner of MMRC from October 1995 to April 1996. Mr.
Greenberg held various positions with AIG and its affiliates from 1978 through
June 1995, having served as Executive Vice President--Domestic Brokerage Group
from 1991 through June 1995. Mr. Greenberg is a director of Marsh & McLennan.
Meryl D. Hartzband, age 43 has been a director of the Company since May
1996. Ms. Hartzband has served as a Managing Director of J.P. Morgan
International Capital Corporation (commercial and investment banking), a
subsidiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan") since August
1994. From 1982 through August 1994, Ms. Hartzband was employed with J.P.
Morgan in various capacities.
Donald Kramer, age 60 has been a director and Vice Chairman of the Company
and President of Tempest Reinsurance Company Limited ("Tempest") since July
1996. Mr. Kramer served as Chairman or Co-Chairman of the Board of Tempest
from its formation in September 1993 until July 1996. Tempest was acquired by
the Company on 1 July 1996. Prior to the formation of Tempest, he was
President of Kramer Capital Corporation (venture capital investments) from
March to September 1993, President of Carteret Federal Savings Bank (banking)
from August 1991 to March 1993, Chairman of the Board of NAC Re Corporation
(reinsurance) from June 1985 to June 1993, Chairman of the Board and Chief
Executive Officer of KCP Holding Company (insurance) from July 1986 to August
1991 and of its affiliates, KCC Capital Managers (insurance investments) and
Kramer Capital Consultants, Inc. (insurance investments), as well as Chairman
of the Board of its subsidiary, National American Insurance Company of
California (insurance) from September 1988 to August 1991. Mr. Kramer is a
director of National Benefit Life Insurance Company of New York City, a
subsidiary of the Travelers Group, and Chairman of the Board of the Brooklyn
College Foundation.
3
<PAGE>
Walter A. Scott, age 60, has been a director of the Company since September
1989. Mr. Scott served as a consultant to the Company from October 1994 until
September 1996. Mr. Scott served as Chairman, President and Chief Executive
Officer of the Company from March 1991 until his retirement in September 1994
and as President and Chief Executive Officer from September 1989 to March
1991. Mr. Scott is a director of Overseas Partners Limited, Pearman and
Watlington Limited and SCUUL Limited. Mr. Scott is also a trustee of Lafayette
College.
Sidney F. Wentz, age 65, has been a director of the Company since May 1993.
Mr. Wentz has served as the Chairman of the Board of Trustees of The Robert
Wood Johnson Foundation (charitable foundation) since 1989. From February 1987
until July 1988, Mr. Wentz served as Chairman and Chief Executive Officer of
Crum & Forster, Inc. (insurance). Mr. Wentz is a director of Castle Energy
Corporation and a trustee of Drew University.
Directors Whose Terms Expire in 2000
Michael G. Atieh, age 44, has been a director of the Company since September
1991. Mr. Atieh has served as Senior Vice President--Sales of Merck-Medco
Managed Care, L.L.C. (managed health care), an indirect wholly owned
subsidiary of Merck & Co., Inc. ("Merck") (pharmaceuticals) since April 1994,
as Vice President--Public Affairs of Merck from January 1994 to April 1994 and
as Treasurer of Merck from April 1990 to December 1993. Mr. Atieh is a
director of Medco Containment Services, Inc.
Bruce L. Crockett, age 53, has been a director of the Company since May
1995. Mr. Crockett served as President and Chief Executive Officer of COMSAT
Corporation ("COMSAT") (information services) from February 1992 until July
1996 and as President and Chief Operating Officer of COMSAT from April 1991 to
February 1992. Mr. Crockett was an employee of COMSAT since 1980 and held
various operational and financial positions including Vice President and Chief
Financial Officer. Mr. Crockett is a director of Eagle Eye Technologies, Inc.,
GlobalTel Resources, Inc. International Business Network for World Commerce &
Industry, Ltd. and INROADS, Inc. and a director or trustee of funds of AIM
Management Group, Inc. Mr. Crockett is also a member of the Board of Trustees
of the University of Rochester.
Robert W. Staley, age 62, has been a director of the Company since January
1986. Mr. Staley has been employed with Emerson Electric Co. ("Emerson")
(electric equipment) since 1975, serving as Vice Chairman of Emerson since
November 1988. Mr. Staley is a director of Emerson.
Gary M. Stuart, age 57, has been a director of the Company since March 1988.
Mr. Stuart has served as Vice President and Treasurer of Union Pacific
Corporation (transportation) since January 1990.
There are no arrangements or understandings between any director and any
other person pursuant to which any director was or is selected as a director
or nominee.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended 30 September 1997, there were five meetings of the
Board of Directors (including regularly scheduled and special meetings). All
incumbent directors attended at least 75% of the aggregate of such meetings
and of the meetings held by all committees of the Board of which they were a
member (or of such meetings during such directors' tenure on the Board of
Directors).
The Board of Directors has established four standing committees: the Audit
Committee, the Compensation Committee, the Executive Committee and the Finance
Committee.
Audit Committee
The Audit Committee is composed entirely of non-management directors and
reviews the adequacy and effectiveness of the Company's external auditors and
their audit report. The Audit Committee is comprised of Sidney F. Wentz
(Chairman), Bruce L. Crockett, Meryl D. Hartzband, Thomas J. Neff and Glen M.
Renfrew. The Audit Committee held four meetings during the year ended 30
September 1997.
4
<PAGE>
Compensation Committee
The Compensation Committee has responsibility for determining executive
compensation. The Compensation Committee is comprised of Bruce L. Crockett
(Chairman), Jeffrey W. Greenberg, Robert M. Hernandez, Thomas J. Neff and
Sidney F. Wentz. The Compensation Committee held four meetings during the year
ended 30 September 1997.
Executive Committee
Except as expressly limited by applicable law, the Company's Memorandum or
Articles or by the Board of Directors, the Executive Committee may exercise
all the powers and authorities of the Board of Directors between meetings of
the full Board of Directors. The Executive Committee also has responsibility
for nominating directors. The Executive Committee will consider a
shareholder's suggestion for candidates if mailed to: Secretary, ACE Limited,
The ACE Building, 30 Woodbourne Avenue, Hamilton HM 08 Bermuda. Any such
suggestion with respect to directors to be elected at the Annual General
Meeting to be held in 1999 must be received not later than 8 December 1998 and
must comply with Article 40 of the Company's Articles. The Executive Committee
is comprised of Robert M. Hernandez (Chairman), Brian Duperreault, Jeffrey W.
Greenberg, Donald Kramer and Robert W. Staley. The Executive Committee held
four meetings during the year ended 30 September 1997.
Finance Committee
The Finance Committee is responsible for recommending asset allocations to
the Board of Directors, approving the guidelines which provide standards to
ensure portfolio liquidity and safety, and approving investment managers and
custodians for portfolio assets. The Finance Committee is comprised of Peter
Menikoff (Chairman), Michael G. Atieh, Robert Ripp, Walter A. Scott, Dermot F.
Smurfit and Gary M. Stuart. The Finance Committee held four meetings during
the year ended 30 September 1997.
DIRECTOR COMPENSATION
Pursuant to the Company's 1995 Outside Directors Plan, non-management
directors of the Company are awarded an annual "retainer award" in the form of
Ordinary Shares having a fair market value of $25,000 (or a pro rata portion
thereof for less than full years of service). The annual retainer will
increase to $35,000 in February 1998. The retainer award is made as of the
date of the Company's annual general meeting, and the fair market value of the
Ordinary Shares is determined as of that date. The value of any fractional
share is generally distributed in cash. Directors vest in the retainer award
shares as of the day immediately preceding the next annual general meeting.
All retainer award shares become fully vested upon a "change in control" of
the Company (as defined in the plan), or if the director ceases service as a
director because of death or disability. If a director ceases service as a
director for any other reason, all unvested retainer award shares are
forfeited.
In addition, each director who serves as the chairman of any committee of
the Board during any plan year quarter is awarded a "committee chairman award"
as of the first business day of the next following plan quarter (generally
ninety-day periods following the annual general meeting), which award is the
number of Ordinary Shares having a fair market value, determined as of such
date, of $1,250 per quarter. All shares awarded as a committee chairman award
are fully vested at the time of award. In addition, a director may elect to
receive his committee chairman award in cash.
Directors are also paid $3,000 for attendance at each meeting of the Board
of Directors and $1,000 for attendance at each meeting of a committee of the
Board of Directors. Directors are also reimbursed for their reasonable
expenses in connection with Board service.
A director may elect to defer the receipt of Ordinary Shares or cash
otherwise payable.
CERTAIN BUSINESS RELATIONSHIPS
Certain shareholders of the Company and their affiliates, including the
employers of or entities otherwise associated with certain directors, have
purchased insurance from the Company on terms the Company believes were no
more favorable to these insureds than those made available to other customers.
5
<PAGE>
The Company and its subsidiaries pay to affiliates of Marsh & McLennan
normal and customary commissions for brokerage activities performed in
connection with the placing of insurance. William M. Mercer, Incorporated
("Mercer"), an employee benefits consulting firm and a wholly owned subsidiary
of Marsh & McLennan, advises the Compensation Committee of the Company's Board
of Directors and receives customary fees in connection therewith.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Executive officers and directors of the Company are subject to the reporting
requirements of Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). During the year ended 30 September 1997, (i) as a result
of a clerical error by the Company, Peter Menikoff was late in reporting an
acquisition of Ordinary Shares, (ii) Keith P. White was late in reporting the
acquisition through marriage of indirect beneficial ownership of certain
Ordinary Shares that his wife had acquired prior to their marriage, (iii) as a
result of a clerical error by the Company, Christopher Z. Marshall was late in
reporting the full number of Ordinary Shares that he acquired in settlement of
certain stock appreciation rights and (iv) as a result of a clerical error by
the Company, Michael G. Atieh, Bruce L. Crockett, Robert M. Hernandez, Peter
Menikoff, Robert Ripp, Gary M. Stuart and Andrew J. Markey (a former director
whose term of office ended in February 1997) were late in reporting two
dividend accruals (amounting in the aggregate to less than four Ordinary
Shares per director) that were credited to their stock accounts with respect
to Ordinary Shares of which they elected to defer receipt under the ACE
Limited 1995 Outside Directors Plan. All such transactions have now been
reported.
BENEFICIAL OWNERSHIP OF ORDINARY SHARES
DIRECTORS AND OFFICERS
The following tables set forth information, as of 10 December 1997, with
respect to the beneficial ownership of Ordinary Shares by Brian Duperreault,
the Company's Chairman, President and Chief Executive Officer (the Company's
"CEO"), the Company's other four most highly compensated executive officers
(the "Named Executive Officers"), each of the Company's directors and by all
directors and executive officers of the Company as a group. Unless otherwise
indicated, the named individual has sole voting and investment power over the
Ordinary Shares under the column "Ordinary Shares Beneficially Owned." The
Ordinary Shares owned by each director and each executive officer constitute
less than one percent of the outstanding Ordinary Shares. The Ordinary Shares
owned by all directors and executive officers as a group constitute
approximately 2.2% of the outstanding Ordinary Shares.
<TABLE>
<CAPTION>
ORDINARY
ORDINARY SHARES
SHARES SUBJECT RESTRICTED
BENEFICIALLY TO ORDINARY
NAME OF BENEFICIAL OWNER OWNED OPTION(1) SHARES(2)
------------------------ ------------ --------- ----------
<S> <C> <C> <C>
Brian Duperreault...................... 64,004 120,000 106,667
Donald Kramer.......................... 33,666 329,243 6,150
Dominic J. Frederico................... 1,268 16,666 7,900
William J. Loschert (3)................ 42,381 75,666 4,917
Christopher Z. Marshall................ 30,247 67,658 4,900
Michael G. Atieh (3)................... 1,632 -- 419
Bruce L. Crockett (3).................. 1,449 -- 419
Jeffrey W. Greenberg (4)............... 7,018 -- 419
Meryl D. Hartzband (4)................. -- -- --
Robert M. Hernandez (3)................ 6,181 -- 419
Thomas J. Neff......................... 503 -- 303
Peter Menikoff (3)..................... 4,279 -- 419
Glen M. Renfrew........................ 1,381 -- 419
Robert Ripp (3)........................ 2,132 -- 419
Walter A. Scott (3).................... 74,168 48,333 419
Dermot F. Smurfit...................... -- -- 147
Robert W. Staley (4)................... 2,118 -- 419
Gary M. Stuart (3)..................... 1,332 -- 419
Sidney F. Wentz (5).................... 3,263 -- 419
All directors and executive officers as
a group
(23 individuals)...................... 307,624 754,114 144,591
</TABLE>
6
<PAGE>
- --------
(1) Represents Ordinary Shares which the reporting person has the right to
acquire within 60 days of 10 December 1997 pursuant to options.
(2) The reporting person has the right to vote (but not dispose of) the
Ordinary Shares listed under "Restricted Ordinary Shares."
(3) The amounts included under "Ordinary Shares Beneficially Owned" and
"Restricted Ordinary Shares" include certain Ordinary Shares for which the
reporting person has elected to defer receipt. The reporting person has
the right to dispose of (but not to vote) such Ordinary Shares.
(4) Ms. Hartzband and Messrs. Greenberg and Staley serve as officers or are
otherwise affiliated with significant shareholders of the Company. The
number of Ordinary Shares beneficially owned by such shareholders is set
forth below.
(5) Includes 2,000 Ordinary Shares owned by Mr. Wentz's wife.
Each of the Company's directors named below is an officer of or otherwise
affiliated with a significant shareholder of the Company. The following table
sets forth the name of each such director, the name of the affiliated
shareholder (or the ultimate parent of such shareholder) and the number of
Ordinary Shares beneficially owned as of December 1997, by such shareholder
(or the ultimate parent of such shareholder).
<TABLE>
<CAPTION>
PERCENT
NUMBER OF OF
ORDINARY ORDINARY
NAME NAME OF SHAREHOLDER SHARES SHARES
- ---- ------------------- --------- --------
<S> <C> <C> <C>
Jeffrey W. Greenberg........ Marsh & McLennan Companies, Inc. 1,263,371 2.3%
Meryl D. Hartzband.......... J. P. Morgan & Co. Incorporated 1,068,340 2.0
Robert W. Staley............ Emerson Electric Co. 207,272 *
</TABLE>
- --------
* Represents less than one percent of the outstanding Ordinary Shares.
OTHER BENEFICIAL OWNERS
The following table sets forth information regarding each person known by
the Company (including corporate groups) to own of record or beneficially own
more than five percent of the Company's outstanding Ordinary Shares as of the
dates indicated below.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT
BENEFICIALLY OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED CLASS
------------------------------------ ------------ -------
<S> <C> <C>
Oppenheimer Group, Inc (1)................................ 9,879,084 18.1%
Oppenheimer Tower
World Financial Center
New York, New York 10281
American Express Financial Corporation (2)................ 4,319,323 7.9
IDS Tower--10
Minneapolis, Minnesota 55440-0010
Wellington Management Company (3)......................... 3,997,225 7.3
75 State Street
Boston, Massachusetts 02109
State Street Bank & Trust Company (4)..................... 3,246,300 5.6
225 Franklin Street
Boston, Massachusetts 02110
T. Rowe Price Associates Inc. (5)......................... 2,760,850 5.1
100 E Prett St.
Baltimore, Maryland 21202
</TABLE>
7
<PAGE>
- --------
(1) Based upon information contained in a Schedule 13G filed by Oppenheimer
Group, Inc. ("Oppenheimer") and upon information obtained from Oppenheimer
as of 30 November 1997. According to such Schedule 13G, Oppenheimer is a
holding company which owns directly or indirectly the managing general
partner of Oppenheimer Capital. Such managing general partner, which is a
registered investment advisor, and persons to whom it has delegated the
authority, have the power on behalf of Oppenheimer Capital to direct the
use of dividends or proceeds of sale of the Ordinary Shares reported as
beneficially owned by Oppenheimer.
(2) Based upon information contained in a Form 13F filed with respect to the
quarter ended 30 September 1997 and information provided by American
Express Financial Corporation as of 1 December 1997.
(3) According to information provided by Wellington Management Company, LLP
("WMC"), WMC is an investment adviser registered with the Securities and
Exchange Commission (the "Commission") under the Investment Advisers Act
of 1940, as amended (the "Advisors Act"). As of 30 September 1997, WMC, in
its capacity as investment adviser, may be deemed to have beneficial
ownership of 4,129,000 Ordinary Shares that are owned by numerous
investment advisory clients, none of which is known to have such interest
with respect to more than five percent of the class. WMC had shared voting
power with respect to 2,634,655 Ordinary Shares and shared dispositive
power with respect to 4,001,290 Ordinary Shares.
(4) Based upon information obtained from State Street Bank and Trust Company
as of 4 December 1997. State Street Research and Management ("State
Street"), a subsidiary of State Street Bank and Trust Company, is an
investment advisor registered with the Commission under the Advisors Act.
The Ordinary Shares reported above were owed by various investment
advisory clients of State Street, none of which is known to have such
interest with respect to more than five percent of the class. State Street
disclaims any beneficial interest in the reported Ordinary Shares.
(5) Based upon information obtained from T. Rowe Price Associates Inc. as of
30 November 1997. All such Ordinary Shares are held in investment advisory
accounts managed by T. Rowe Price Associates Inc.
Other than as disclosed above, there are no persons who own of record, or
are known by the Company to beneficially own, as of 10 December 1997, more
than five percent of the Company's outstanding Ordinary Shares.
EXECUTIVE COMPENSATION
The following table sets forth, in summary form, compensation earned by the
Company's CEO and by the Named Executive Officers of the Company for the
periods presented.
8
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------------------
SECURITIES
RESTRICTED UNDERLYING
NAME AND FISCAL OTHER ANNUAL STOCK OPTIONS/ ALL OTHER
PRINCIPAL POSITION(1) YEAR SALARY BONUS(2) COMPENSATION(3) AWARDS(4) SARS(#) COMPENSATION(5)
--------------------- ------ -------- ---------- --------------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Brian Duperreault....... 1997 $531,258 $1,200,000 $221,693 $5,400,000(6) 60,000 $259,689
Chairman, President and 1996 468,720 650,000 191,241 585,000(6) 60,000 167,808
Chief Executive Officer
of ACE Limited 1995 450,000 400,000 181,949 2,350,000(7) 360,000 127,500
Donald Kramer........... 1997 468,750 475,000 2,750 270,000(6) 20,000 141,563
Vice Chairman of ACE 1996 112,500 337,500 -- 146,250(6) 25,000 67,500
Limited, President of
Tempest Reinsurance
Company Limited
130,163(8)
Dominic J. Frederico.... 1997 310,000 300,000 185,498 540,000(6) 30,000 91,500
President, A.C.E. 1996 267,507 127,500 121,884 117,000(6) 20,000 59,251
Insurance Co. Ltd.
49,725(8)
1995 168,381 130,000 102,270 -- 30,000 44,757
William J. Loschert..... 1997 326,250 250,000 141,807 270,000(6) 20,000 86,438
Chairman, ACE London 1996 311,250 131,250 53,322 117,000(6) 20,000 66,375
51,187(8)
1995 281,250 150,000 49,860 -- 20,000 64,688
Christopher Z. Marshall. 1997 308,750 225,000 3,473 270,000(6) 20,000 80,063
Chief Financial Officer 1996 286,254 127,500 -- 117,000(6) 20,000 62,063
of ACE Limited
49,725(8)
1995 256,250 150,000 -- -- 20,000 60,938
</TABLE>
- --------
(1) Mr. Kramer's employment with the Company began on 1 July 1996. With respect
to the fiscal year ended September 30, 1996, the salary reported for Mr.
Kramer represents Mr. Kramer's salary from 1 July 1996, the date on which
Tempest was acquired by the Company, through 30 September 1996 and the
bonus reported for Mr. Kramer represents his bonus for the year ended 30
September 1996 which the Company agreed to pay in connection with its
acquisition of Tempest. Mr. Frederico's employment with the Company began
on 9 January 1995.
(2) Bonuses for the year ended 30 September 1996 for Messrs. Kramer, Loschert,
Marshall and Frederico reflect their election to forgo up to 25% of their
annual bonus in return for the receipt of restricted Ordinary Shares with a
fair market value equal to 115% of the amount of the foregone bonus. See
Note 8 below.
(3) Other annual compensation for the year ended 30 September 1997 includes
commuting and living allowances in respect of Messrs. Duperreault,
Frederico and Loschert in the amounts of $188,004, $136,000 and $141,807,
respectively; for the year ended 30 September 1996 includes commuting and
living allowances in respect of Messrs. Duperreault, Frederico and Loschert
in the amounts of $170,004, $96,000 and $41,400, respectively; and for the
year ended 30 September 1995 includes commuting and living allowances in
respect of Messrs. Duperreault, Frederico and Loschert in the amounts of
$170,004, $99,501 and $45,247, respectively.
9
<PAGE>
(4) As of 30 September 1997, the number and value of restricted Ordinary
Shares held by each of the above named executive officers was: Mr.
Duperreault--106,667 ($10,026,698) , Mr. Kramer--6,150 ($578,101), Mr.
Frederico--7,900 ($742,601), Mr. Loschert--4,917 ($462,168) and Mr.
Marshall--4,900 ($460,609). Such values were determined by multiplying the
number of shares by $94.00 (the closing price of the Ordinary Shares on
the New York Stock Exchange (the "NYSE") on 30 September 1997).
(5) All other compensation with respect to the year ended 30 September 1997
represents contributions by the Company to defined contribution plans on
behalf of the named individuals for the above amounts.
(6) The value of the restricted shares awarded to the individuals in respect
of the year ended 30 September 1997 was determined by multiplying the
number of shares awarded by the closing price of the Ordinary Shares on
the NYSE on 12 November 1997 ($90.00), in each case the date of the award.
The value of the restricted shares awarded to the individuals in respect
of the year ended 30 September 1996 was determined by multiplying the
number of shares awarded by the closing price of the Ordinary Shares on
the NYSE on (i) with respect to Mr. Duperreault, 4 December 1996 ($59.50)
and (ii) with respect to the Named Executive Officers, 14 November 1996
($58.50), in each case the date of the award. The number of restricted
Ordinary Shares awarded to each of the above named executive officers was:
<TABLE>
<CAPTION>
FISCAL FISCAL
NAME 1997 1996
---- ------ ------
<S> <C> <C>
Brian Duperreault........................................... 60,000 10,000
Donald Kramer............................................... 3,000 2,500
Dominic J. Frederico........................................ 6,000 2,000
William J. Loschert......................................... 3,000 2,000
Christopher Z. Marshall..................................... 3,000 2,000
</TABLE>
Other than 50,000 of the 60,000 restricted Ordinary Shares awarded to Mr.
Duperreault in 1997, the restrictions with respect to one-third of the
Ordinary Shares lapse at the end of each of the first, second and third
anniversary of the date of the award. With respect to such 50,000
restricted Ordinary Shares, 10,000 restricted Ordinary Shares vest on 12
November 2000, 20,000 restricted Ordinary Shares vest on 12 November 2001
and 20,000 restricted Ordinary Shares vest on 12 November 2002. During the
restricted period, the executive officers are entitled to vote the Ordinary
Shares and receive dividends.
(7) The value of the restricted shares awarded to Mr. Duperreault during the
year ended 30 September 1995 was determined by multiplying the number of
shares awarded (100,000) by the closing price of the Ordinary Shares on
the NYSE on 9 November 1994 ($23.50), the date of the award. The
restrictions with respect to 40,000 shares lapsed on 30 September 1997 and
the restrictions with respect 20,000 shares lapsed on 30 September 1996.
The restrictions with respect to the remaining 40,000 shares will lapse
equally on each of 30 September 1998 and 1999. During the restricted
period, Mr. Duperreault is entitled to vote the Ordinary Shares and
receive dividends.
(8) In addition to the restricted shares discussed in (6) above, the Company's
executive officers, other than Mr. Duperreault, were given the option to
elect to forgo up to 25% of their annual bonus in return for the receipt
of restricted Ordinary Shares with a fair market value equal to 115% of
the amount of the foregone bonus. The value of the restricted shares shown
for Messrs. Kramer, Loschert, Marshall and Frederico was determined by
multiplying the number of shares acquired in respect of their foregone
bonuses by the closing price of the Ordinary Shares on the NYSE on 14
November 1996 ($58.50), the date of acquisition. The restrictions with
respect to one-third of the Ordinary Shares lapse at the end of each of
the first, second and third anniversary of the date of the award. During
the restricted period, the executive officers are entitled to vote the
Ordinary Shares and receive dividends.
The following table sets forth information concerning awards of stock
options under the Company's 1995 Long Term Incentive Plan and the Equity
Linked Incentive/Stock Appreciation Rights Plan made to the Company's CEO and
to the Named Executive Officers during the year ended 30 September 1997. No
stock appreciation rights ("SARs") were awarded during the year ended 30
September 1997.
10
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZED
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL OPTIONS ANNUAL RATES OF STOCK
OPTIONS AWARDED TO EXERCISE OR PRICE APPRECIATION
AWARDED IN EMPLOYEES IN BASE PRICE FOR OPTION TERM
NAME FISCAL 1997 FISCAL 1997 ($/SH) EXPIRATION DATE ---------------------
- ---- ----------- ------------- ----------- ----------------<S> <C>
5% 10%
----------------------- ---------
Brian Duperreault....... 60,000(1) 5.78% $59.50 4 December 2006 $2,245,154 $5,689,661
Donald Kramer........... 25,000(1) 2.4 58.50 14 November 2006 919,758 2,330,848
Dominic J Frederico..... 20,000(1) 1.9 58.50 14 November 2006 735,807 1,864,679
William J. Loschert..... 20,000(1) 6.9 58.50 14 November 2006 735,807 1,864,679
44,000(2) 64.00 2 October 2001 606,866 1,306,906
9,000(1) 64.00 31 March 2007 362,243 917,996
Christopher Z. Marshall 20,000(1) 6.5 58.50 14 November 2006 735,807 1,864,679
28,000(2) 64.00 1 October 2001 386,187 831,667
12,000(3) 64.00 1 October 2002 212,184 468,872
9,000(1) 64.00 31 March 2007 362,243 917,996
</TABLE>
- --------
(1) Options vest one-third on the first, second and third anniversary of the
grant.
(2) Two-thirds of the options were vested upon issuance and the remaining
options vested on 1 October 1997.
(3) One-third of the options were vested upon issuance, one-third of the
options vested on 1 October 1997 and the remaining options vest on 1
October 1998.
The following table sets forth information concerning the number of SARs
exercised and the value received in fiscal 1997, the number of unexercised
stock options outstanding at 30 September 1997, and the value of any
unexercised in-the-money stock options outstanding at such time, held by the
Company's CEO and the Named Executive Officers. There were no exercises of
options during the year ended 30 September 1997 by the Company's CEO or any of
the Named Executive Officers. There were no SARs outstanding at 30 September
1997.
SAR EXERCISES IN LAST FISCAL YEAR AND OPTION VALUES AT 30 SEPTEMBER 1997
<TABLE>
<CAPTION>
VALUE OF
VALUE NUMBER OF UNEXERCISED
SHARES ACQUIRED REALIZED UNEXERCISED IN-THE-MONEY
NAME ON EXERCISE (1) ($) OPTIONS OPTIONS
---- --------------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Brian Duperreault....... -- -- 420,000 $27,045,000
Donald Kramer........... -- -- 345,910 23,882,755
Dominic J. Frederico.... -- -- 50,000 2,588,750
William J. Loschert..... 44,000 2,055,570 128,000 5,860,000
Christopher Z. Marshall. 40,000 1,813,170 124,000 5,739,997
</TABLE>
- --------
(1) During 1997, Mr. Loschert and Mr. Marshall exercised all of their
outstanding SARs and used all and a portion, respectively, of the cash
proceeds to purchase 37,786 and 28,500 Ordinary Shares, respectively, at a
15% discount to the then market price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors has
responsibility for determining the compensation of the Company's executive
officers. None of the members of the Compensation Committee was an officer or
employee of the Company.
EMPLOYMENT AGREEMENTS
The following is intended to be a summary of the terms of the employment
agreements entered into between the Company and the executive officers named
below.
The Company has entered into an agreement with Brian Duperreault, pursuant
to which he is to serve as Chairman, President and Chief Executive Officer of
the Company. The agreement provides for a base salary of $550,000 per year,
subject to increase. Effective 1 January 1998, Mr. Duperreault's annual base
salary will be
11
<PAGE>
$700,000. The agreement also provides for an annual discretionary bonus. Mr.
Duperreault is also eligible to participate in the Company's benefit plans.
Pursuant to an Option and Restricted Share Agreement and Plan entered into in
connection with Mr. Duperreault's employment agreement, Mr. Duperreault was
awarded 100,000 restricted shares and options to purchase 300,000 Ordinary
Shares at $22.625 per Ordinary Share. The restrictions with respect to 20,000
of the aforementioned restricted shares expired on 30 September 1996 and the
restrictions with respect to 40,000 of the aforementioned restricted shares
expired on 30 September 1997. The aforementioned restrictions with respect to
the remaining 40,000 shares will lapse equally on each of 30 September 1998 and
1999. The aforementioned options with respect to 100,000 Ordinary Shares became
exercisable on 30 September 1997 and the aforementioned options become
exercisable with respect to 100,000 Ordinary Shares on each of 30 September
1998 and 1999 and expire on 30 September 2004. The restrictions with respect to
the aforementioned restricted shares will lapse, and the aforementioned options
will become immediately exercisable, in the event of Mr. Duperreault's death or
disability, the termination of Mr. Duperreault's employment without cause or in
the event of a "change in control" (as defined). In the event of termination of
Mr. Duperreault's employment with the Company for any other reason, Mr.
Duperreault will forfeit any options which were not exercisable on his
termination date and any restricted shares for which the restricted period had
not yet lapsed. Mr. Duperreault may exercise any of the options which were or
which become exercisable on his termination date for a period of one year if
his termination is by reason of his death or disability or by the Company
without cause and for 30 days if such termination is by the Company for cause
or voluntarily by Mr. Duperreault. The agreement also provides Mr. Duperreault
with customary executive benefits, including participation in the Company's
retirement plan, the Company's supplemental executive retirement plan, various
insurance plans, reimbursement of housing and certain personal travel expenses
and, generally, such other benefit programs as are available to the Company's
other senior executives. The agreement expires on 30 September 1998, and is
subject to automatic annual one-year renewals thereafter unless notice of non-
renewal is provided by the Company's Board of Directors. In addition, if,
following a change in control, Mr. Duperreault's employment is terminated
without cause, his salary and benefits will continue for 12 months and he will
be entitled to any previously awarded but unpaid bonus and a bonus for any
uncompleted fiscal year based upon the bonus for the last completed fiscal year
and the number of days in the then current fiscal year in which he was
employed. Pursuant to the agreement, Mr. Duperreault has agreed not to engage
in any activity in Bermuda or the Cayman Islands for a period of 12 months
following termination of his employment with the Company that would compete
with any business being conducted by the Company or its subsidiaries, or which
was actively being developed by the Company or its subsidiaries during the term
of Mr. Duperreault's employment.
A "change in control" under Mr. Duperreault's employment agreement is
generally deemed to occur when (i) any person becomes the beneficial owner of
50% or more of the voting stock of the Company, (ii) the majority of the Board
consists of individuals other than Incumbent Directors, which term means the
members of the Board on the date of the Agreement; provided that any person
becoming a director subsequent to such date whose election or nomination for
election was supported by three-quarters of the directors who then comprised
the Incumbent Directors shall be considered to be an Incumbent Director; (iii)
the Company adopts any plan of liquidation providing for the distribution of
all or substantially all of its assets; (iv) all or substantially all of the
assets or business of the Company are disposed of pursuant to a merger,
consolidation or other transaction (unless the shareholders of the Company
immediately prior to such merger, consolidation or other transaction
beneficially own, directly or indirectly, in substantially the same proportion
as they owned the voting stock of the Company, all of the voting stock or other
ownership interests of the entity or entities, if any, that succeed to the
business of the Company); or (v) the Company combines with another company and
is the surviving corporation but, immediately after the combination, the
shareholders of the Company immediately prior to the combination hold, directly
or indirectly, 50% or less of the voting stock of the combined company.
The Company has entered into an agreement with Dominic J. Frederico, pursuant
to which he is to serve as President, A.C.E. Insurance Company, Ltd. The
agreement currently provides for a base salary of $320,000 per year, subject to
increase, an annual discretionary bonus plus participation in the Company's
benefit plans. Effective 1 January 1998, Mr. Frederico's annual base salary
will be $375,000. Pursuant to his agreement, Mr. Frederico was awarded options
to purchase 10,000 Ordinary Shares at $22.875 per Ordinary Share. The options
12
<PAGE>
become exercisable with respect to 5,000 Ordinary Shares on each of 9 January
1998 and 1999 and expire on 9 January 2005. The agreement also provides Mr.
Frederico with customary executive benefits, including participation in the
Company's retirement plan, the Company's supplemental executive retirement
plan, various insurance plans, reimbursement of housing and certain personal
travel expenses and, generally, such other benefit programs as are available to
the Company's other senior executives. The agreement expires on 1 January 1998,
and is subject to automatic annual one-year renewals thereafter unless notice
of non-renewal is provided by the Company. Upon termination without cause, Mr.
Frederico's salary and benefits are agreed to continue for 24 months and any
previously awarded but unpaid bonus is to be paid. Pursuant to the agreement,
Mr. Frederico has agreed not to engage in any activity in the United States,
Bermuda or the Cayman Islands for a period of 12 months following his
termination of employment with the Company that would compete with the business
of the Company.
The Company has entered into an agreement with William J. Loschert which
currently provides for a base salary of $330,000 per year, subject to increase,
an annual discretionary bonus plus participation in the Company's benefit
plans. Effective 1 January 1998, Mr. Loschert's annual base salary will be
$375,000. The agreement also provides Mr. Loschert with customary executive
benefits, including participation in the Company's retirement plan, the
Company's supplemental executive retirement plan, various insurance plans,
reimbursement of housing and certain personal travel expenses and, generally,
such other benefit programs as are available to the Company's other senior
executives. The term of Mr. Loschert's agreement is automatically extended with
each extension of, and for the term of, Mr. Loschert's work permit, unless
notice of non-renewal is provided by either party. Upon Mr. Loschert's
resignation within six months after a "change in control" (as defined below),
if he makes certain good faith determinations regarding changes in the nature
of his duties, or upon termination without cause, Mr. Loschert's salary and
benefits are agreed to continue for the balance of his term of employment and
any previously awarded but unpaid bonus is to be paid. Pursuant to the
agreement, Mr. Loschert has agreed not to engage in any activity in the United
States, Bermuda or the Cayman Islands for a period of 24 months following his
termination of employment with the Company that would compete with the business
of the Company.
The Company has entered into an agreement with Christopher Z. Marshall which
currently provides for a base salary of $315,000 per year, subject to increase
by the Company's Chief Executive Officer, an annual discretionary bonus plus
participation in the Company's benefit plans. Effective 1 January 1998, Mr.
Marshall's annual base salary will be $350,000. The agreement also provides Mr.
Marshall with customary executive benefits, including participation in the
Company's retirement plan, the Company's supplemental executive retirement
plan, various insurance plans and, generally, such other benefit programs as
are available to the Company's other senior executives. The agreement is for a
three-year term, but provides for automatic one-year extensions after the first
year of each three-year term, unless notice of non-renewal is provided by
either party. Upon Mr. Marshall's resignation within six months after a "change
in control" (as defined below), if he makes certain good faith determinations
regarding changes in the nature of his duties, or upon termination without
cause, Mr. Marshall's salary and benefits are agreed to continue for the
balance of his term of employment and any previously awarded but unpaid bonus
is to be paid. Pursuant to the agreement, Mr. Marshall has agreed not to engage
in any activity in the United States, Bermuda or the Cayman Islands for a
period of 24 months following his termination of employment with the Company
that would compete with the business of the Company.
As used in Messrs. Loschert's and Marshall's employment agreements, a "change
in control" generally means a change in the beneficial ownership of the
Company's voting stock, a change in the composition of the Company's Board of
Directors or a sale of the Company's assets if (A) any person (or group or
association, as defined in Section 13(d) of the Securities Exchange Act of
1934, of persons) (other than (1) a trustee or other fiduciary of securities
held under an employee benefit plan of the Company, (2) a corporation owned
directly or indirectly by the shareholders of the Company in substantially the
same proportions as their ownership of the Company or (3) any person in which
the officer has a substantial equity interest) acquires 50% or more of the
combined voting power of the outstanding securities of the Company having a
right to vote at the election of
13
<PAGE>
directors; (B) there is a sale of all or substantially all of the assets of
the Company; or (C) there shall cease to be a majority of the Board of
Directors of the Company whose members are either (1) previous members of the
Board of Directors or (2) recommended for election by a vote of at least two-
thirds of the members of the Board of Directors or a committee thereof.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
comprised entirely of independent, non-management directors. The Committee has
responsibility for developing and implementing the Company's compensation
policy for senior management, and for determining the compensation for the
executive officers of the Company. The goal of the Committee is to achieve
fair compensation for the individuals and to enhance shareholder value by
continuing to closely align the financial rewards of management with those of
the Company's shareholders.
The Company's compensation program is structured to support the human
resource requirements of its business. The Company seeks to attract and retain
qualified executives who are creative, motivated and dedicated. With respect
to its executive officers, the Company competes with specialty insurance and
financial companies world-wide, although primarily with companies based in
North America and, more recently, the United Kingdom. The Committee is very
much aware of the unique circumstances which relate to the attraction and
retention of superior executives in Bermuda, and attempts to create and
administer a compensation program to achieve that result with consistency
throughout the Company.
Each executive's total compensation is generally comprised of three
components: base salary, annual incentive compensation awards and long-term
incentive compensation awards. The mix of an officer's total compensation is
generally based upon the seniority of the officer's position with more senior
officers receiving a greater percentage of their total compensation in the
form of incentive compensation.
Salary and incentive compensation awards are reviewed annually for
competitiveness and are determined in large part by reference to compensation
ranges for comparable positions at comparable companies based in Bermuda and
the United States. The Company takes the compensation of the upper quartile of
its applicable peer group into account in establishing salary and annual
incentive compensation. Actual salary and annual incentive compensation may be
above or below such target based on individual and corporate performance
during the prior fiscal year.
Because the Company's business activities can result in significant earnings
fluctuation from year to year, each executive's contribution to the
advancement of long-term corporate goals is also considered. These factors
include, among other things, underwriting and financial results, business
production, development of management team and strategic steps such as
development of new products and lines of business, geographical spread of
business and acquisitions.
Base Salary
In determining the salary of each senior executive, the Committee is
assisted by William M. Mercer, Incorporated, an independent consulting firm,
which annually accumulates data from a number of comparable companies. The
data is analyzed to establish salary ranges for comparable positions in
companies of approximately equal size and complexity. The Company's Chief
Executive Officer makes recommendations to the Committee with respect to the
base salary of each senior executive other than himself. The Committee
discusses these recommendations, and the relevant data, and then determines
the senior executives' base salary. The Committee meets separately to
determine the base salary of the Company's Chief Executive Officer.
Annual Incentive Compensation
At the conclusion of each fiscal year, the Committee reviews with the
Company's Chief Executive Officer the performance of each senior executive
against goals established at the beginning of the year. Based upon the
14
<PAGE>
overall performance of the Company and the contribution by the individuals in
achieving that performance by attaining the originally established goals
(taking into account any goals added or modified during the course of the
year), the Company's Chief Executive Officer recommends to the Committee
annual incentive compensation levels for each senior executive. The Committee
considers his recommendations, and the relevant data, and then determines the
annual incentive compensation for each senior executive.
The Committee meets separately to evaluate the performance of the Chief
Executive Officer and determine his annual incentive award.
Long-Term Incentive Compensation
At the Annual General Meeting held in February 1996, shareholders adopted
the ACE Limited 1995 Long-Term Incentive Plan (the "1995 Plan"). In
furtherance of the objectives of the 1995 Plan, the Committee has established
a set of goals, including:
(i) increasing officer ownership of the Company's outstanding shares to
approximately 2.5% of outstanding shares over a five to seven year
period;
(ii) awarding long-term incentive awards at more competitive levels
annually; and
(iii) providing capital accumulation opportunities that foster attraction
and retention of key management employees by linking their
interests with shareholder interests.
With respect to guidelines for administering the 1995 Plan, the Committee
makes long-term compensation awards based on individual and Company
performance, and on the practices of a group of comparable companies. While
the 1995 Plan provides for a range of types of awards, the Committee
anticipates that over the next few years, awards generally will be in the form
of stock options and/or restricted stock. The Committee believes that awards
of stock options, which reward Company stock price appreciation over the long-
term, are particularly appropriate in light of the nature of the Company's
business and long-term business plans.
Chief Executive Officer's Fiscal 1997 Compensation
As set forth in the Summary Compensation Table above, Mr. Duperreault's
total annual compensation for the year ended 30 September 1997 was $1,952,951.
Such annual compensation consisted of base salary of $531,258 pursuant to Mr.
Duperreault's employment agreement described elsewhere herein, see
"--Employment Agreements," an annual discretionary bonus of $1,200,000 and
$221,693 in other annual compensation. In determining Mr. Duperreault's annual
bonus and long-term incentive compensation awards and adjustments to his base
salary, the Committee considered the Company's exceptional financial and
operating performance during the year ended 30 September 1997, as well as the
completion of certain strategic initiatives. The Committee also considered the
compensation levels and components of the chief executive officers of a Mercer
recommended peer group.
The Company is not a U.S. taxpayer, and therefore Section 162(m) of the U.S.
Internal Revenue Code (which restricts the deductibility of certain
compensation under U.S. tax rules) is inapplicable to the Company's
compensation payments.
The foregoing report has been approved by all members of the Committee.
Bruce L. Crockett (Chairman)
Jeffrey W. Greenberg
Robert M. Hernandez
Thomas J. Neff
Sidney F. Wentz
15
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the dollar change in the cumulative
total shareholder return on the Company's Ordinary Shares from 25 March 1993
(the date on which the Company's Ordinary Shares were first traded on the NYSE)
through 30 September 1997 as compared to the cumulative total return of the
Standard & Poor's 500 Stock Index and the cumulative total return of the
Standard & Poor's Property-Casualty Insurance Index. The chart depicts the
value on each of 30 September 1993, 1994, 1995, 1996 and 1997 of a $100
investment made on 25 March 1993, with all dividends reinvested.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG ACE LIMITED, S&P 500 INDEX AND PEER GROUP
<TABLE>
<CAPTION>
Measurement Period S&P S&P PROPERTY-CASUALTY
(Fiscal Year Covered) Ace Limited 500 INDEX INSURANCE INDEX
- --------------------- ----------- --------- ---------------------
<S> <C> <C> <C>
Measurement Pt-
03/23/93 $100 $100 $100
FYE 09/30/93 $117 $103 $100
FYE 09/30/94 $ 86 $139 $119
FYE 09/30/95 $126 $139 $119
FYE 09/30/96 $197 $167 $134
FYE 09/30/97 $353 $235 $207
</TABLE>
STOCK SPLIT PROPOSAL
(Item B on Proxy Card)
By resolutions adopted on 13 November 1997, the Board of Directors adopted a
resolution declaring it advisable to amend Article Six of the Company's
Memorandum of Association (the "Memorandum") to decrease the authorized share
capital of the Company to U.S.$22,500,000, divided into 300,000,000 Ordinary
Shares, par value of U.S.$0.04166667 per share, and 10,000,000 other Shares,
par value of U.S.$1.00 per share ("Other Shares") and to effect a 3-for-1 split
of the Company's Ordinary Shares. The Special Resolution of Members approving
the foregoing, and which contains the proposed revised Article Six of the
Memorandum and Article 4(a) of the Company's Articles is set forth as Exhibit A
to this Proxy Statement. The Board of Directors directed that the amendment be
submitted for consideration by the shareholders at the Annual General Meeting.
The Company's Memorandum currently authorizes the issuance of up to 3,334,697
Callable Preferred Shares, 100,000,000 Ordinary Shares and 10,000,000 Other
Shares. As of 13 December 1997, there were 54,519,540 Ordinary Shares
outstanding and no Callable Preferred Shares or Other Shares outstanding.
The Company's Board of Directors believes that the proposed 3-for-1 split of
the issued Ordinary Shares will result in a market price that should be more
attractive to a broader spectrum of investors and therefore should
16
<PAGE>
benefit both the Company and its shareholders. The additional Ordinary Shares
resulting from the split will not reduce the shareholders' proportionate
interests in the Ordinary Shares. In addition, as a result of the stock split,
the number of Ordinary Shares issuable under the Company's benefit and
compensation plans referred to above will be adjusted accordingly. The
increase in authorized Ordinary Shares will not affect the present ratio of
authorized but unissued Ordinary Shares to issued Ordinary Shares, thus
maintaining the same relative degree of flexibility for the Company in meeting
future stock needs.
The Callable Preferred Shares were originally issued prior to the Company's
initial public offering (the "IPO") in March 1993 and were redeemed in
connection with the IPO. The Company's Board of Directors does not currently
intend to issue any Callable Preferred Shares and therefor has decided to
remove the Callable Preferred Shares from the Company's authorized share
capitalization. The Company's Board of Directors believes that it has the
flexibility to issue Other Shares with substantially identical terms and
conditions as the Callable Preferred Shares if the Company's Board of
Directors deems it advisable in the future to do so.
As is currently the case, the authorized Ordinary Shares in excess of those
presently outstanding will be available for issuance at such times and for
such purposes as the Board of Directors may deem advisable without further
action by the Company's shareholders, except as may be required by applicable
laws or regulations, including stock exchange rules. These purposes may
include additional stock dividends, stock splits, employee benefit programs,
corporate acquisitions or other corporate purposes. The Board does not intend
to issue any stock except on terms or for reasons which the Board deems to be
in the best interests of the Company and its shareholders. Because the holders
of the Company's Ordinary Shares do not have preemptive rights, the issuance
of Ordinary Shares (other than on a pro-rata basis to all current
shareholders) would reduce the current shareholders' proportionate interests.
However, in any such event, shareholders wishing to maintain their interests
may be able to do so through normal market purchases. Any future issuance of
Ordinary Shares will be subject to the rights of holders of outstanding Other
Shares the Company may issue in the future.
If the proposed Amendment is approved by the shareholders, the Company's
Board of Directors will set and publicly announce a record date for
determining shareholders entitled to the stock split and the effective date of
the stock split. If the proposed Amendment is approved by the shareholders,
the Company will apply to the New York Stock Exchange and Bermuda Stock
Exchange for the listing of the additional Ordinary Shares that would be
issued as a result of the split. Provided the listing application is approved
by these stock exchanges, the stock split would be accomplished by mailing to
each shareholder of record as of the close of business on the stock split
record date a certificate representing two additional Ordinary Shares for each
Ordinary Share held by the shareholder on that date.
EXISTING CERTIFICATES WILL CONTINUE TO REPRESENT THE NUMBER OF ORDINARY
SHARES EVIDENCED THEREBY. EXISTING CERTIFICATES WILL NOT BE EXCHANGED FOR NEW
CERTIFICATES AND CERTIFICATES SHOULD NOT BE RETURNED TO THE COMPANY OR ITS
TRANSFER AGENT UNTIL THE SHARES REPRESENTED BY THE CERTIFICATES ARE
TRANSFERRED.
Under United States federal income tax laws, the receipt of additional
Ordinary Shares from the stock split will not constitute taxable income to the
shareholders; the cost or other tax basis to a shareholder of each share held
immediately prior to the split will be divided equally between the
corresponding three shares held immediately after the split; and the holding
period for each of the three shares will include the period for which the
corresponding share was held before the stock split record date. The laws of
jurisdictions other than the United States may impose income taxes on the
receipt by a shareholder of additional Ordinary Shares resulting from the
split; shareholders subject to such laws are urged to consult their tax
advisors.
Assuming transactions of an equivalent dollar amount, brokerage commissions
on purchases and sales of the Ordinary Shares after the split and transfer
taxes, if any, may be somewhat higher than the split, depending on the
specific number of shares involved.
17
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE STOCK SPLIT
PROPOSAL. Proxies will be so voted unless shareholders specify otherwise in
their proxies. The affirmative vote of holders of two-thirds of the outstanding
Ordinary Shares is required for approval of this proposal. Consequently, any
shares not voted (whether by abstention, broker non-vote or otherwise) will
have the same effect as votes against the Stock Split Proposal.
RECORD DATE PROPOSAL
(Item C on the Proxy Card)
Article 33 of the Company's Articles currently provides that in lieu of or
apart from closing the share register, the Company's Board of Directors may fix
in advance a date as the record date for determining shareholders entitled to
notice of or to vote at a shareholders meeting and for determining the
shareholders entitled to receive payment of any dividend. Article 33 also
purports to limit the Board of Directors' ability to set a record date for
determining the shareholders entitled to receive payment of any dividend more
than 90 days prior to the date of payment.
The Company's Board of Directors believes that the purported 90-day
limitation is unclear and in any event unduly limits its flexibility to declare
dividends and has proposed to remove this limitation. The Company's Board of
Directors has generally set record dates for determining the shareholders
entitled to receive payment of any dividend and has no current intention to
change this practice but, if the Record Date Proposal is approved, reserves the
right to set the record date for determining the shareholders entitled to
receive payment of any dividend more than 90 days prior to the payment date.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RECORD DATE PROPOSAL.
Proxies will be so voted unless shareholders specify otherwise in their
proxies. The affirmative vote of holders of two-thirds of the outstanding
Ordinary Shares is required for approval of this proposal. Consequently, any
shares not voted (whether by abstention, broker non-vote or otherwise) will
have the same effect as votes against the proposal. If the Record Date Proposal
is approved by the shareholders, it will become effective upon the filing of
the Special Resolution of Members with the Registrar of Companies of the Cayman
Islands, which will occur as soon as reasonably practicable after approval.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(Item D on Proxy Card)
The appointment of independent accountants is approved annually by the Board
of Directors and ratified by the Company's shareholders. The decision of the
Board of Directors is based on the recommendation of the Audit Committee. In
making its recommendation, the Audit Committee reviews both the audit scope and
estimated fees for professional services for the coming year. The Board of
Directors has authorized the engagement of Coopers & Lybrand L.L.P. as the
Company's independent accountants for the year ended 30 September 1998. The
Company has had a working association with Coopers & Lybrand L.L.P. since 1985;
Coopers & Lybrand L.L.P. has had the responsibility for examining the
consolidated financial statements of the Company and its subsidiaries since
1985.
Representatives of Coopers & Lybrand L.L.P. will attend the Annual General
Meeting and will have an opportunity to make a statement if they wish. They
will also be available to answer questions at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS RATIFICATION OF THE APPOINTMENT OF COOPERS
& LYBRAND L.L.P. AS THE COMPANY'S INDEPENDENT ACCOUNTANTS.
18
<PAGE>
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
If you wish to submit a proposal to be considered for inclusion in the proxy
material for the next annual meeting, please send it to the Secretary, ACE
Limited, The ACE Building, 30 Woodbourne Avenue, Hamilton HM 08 Bermuda. Under
the rules of the Securities and Exchange Commission, proposals must be
received no later than 26 August 1998 to be eligible for inclusion in the 1999
Annual General Meeting proxy statement.
SOLICITATION OF PROXIES
The cost of solicitation of proxies will be borne by the Company.
Solicitation will be made by mail, and may be made by directors, officers and
employees, personally or by telephone or facsimile. Proxy cards and materials
also will be distributed to beneficial owners of Ordinary Shares through
brokers, custodians, nominees and other parties, and the Company expects to
reimburse such parties for their charges and expenses. Corporate Investor
Communications, Inc. has been retained to assist the Company in the
solicitation of proxies at a fee estimated not to exceed $4,000, plus out-of-
pocket expenses.
OTHER MATTERS
The Board of Directors of the Company does not know of any matters which may
be presented at the Annual General Meeting other than those specifically set
forth in the Notice of Annual General Meeting. If any other matters come
before the meeting or any adjournment thereof, the persons named in the
accompanying form of proxy and acting thereunder will vote in accordance with
their best judgment with respect to such matters.
By Order of the Board of Directors,
Brian Duperreault,
Chairman, President and Chief
Executive Officer
19
<PAGE>
EXHIBIT A
ACE LIMITED SPECIAL RESOLUTION NO.
Amendment of the Memorandum of Association and Amendment
of the Amended and Restated Articles of Association
RESOLVED, that
1.1 Article Six of the Company's Memorandum of Association shall be amended,
as set forth below, to effect a three-for-one split of the Company's
Ordinary Shares and to eliminate the Company's Callable Preferred Shares:
6. The share capital of the Company is U.S. $22,500,000, divided into
300,000,000 Ordinary Shares, par value of U.S. $0.041666667 per share,
and 10,000,000 other Shares, par value of U.S. $1.00 per share, which
may be issued in series, all of such shares with power for the Company
insofar as is permitted by law, to redeem, call or purchase any of its
shares and to increase or reduce the said capital subject to the
provisions of the Companies Law (Cap. 22) and the Articles of
Association and to issue any part of its capital, whether original,
redeemed, called or increased with or without any preference, priority
or special privilege or subject to any postponement of rights or to any
conditions or restrictions and so that unless the conditions of issue
shall otherwise expressly declare every issue of shares whether
declared to be preference or otherwise shall be subject to the powers
hereinabove contained.
1.2 At 11:59 p.m. (New York City time) on the date the aforementioned
Amendment is filed with the Registrar of Companies of the Cayman Islands
(the "Effective Time"), such Amendment shall become effective and each
Ordinary Share, par value $0.125 per share, of the Company issued and
outstanding immediately prior to the Effective Time will automatically be
split into three Ordinary Shares, par value $0.041666667 per share.
1.3 The first paragraph of Article 4(a) of the Company's Amended and Restated
Articles of Association (the "Articles") shall be amended as set forth
below:
(a) The authorised share capital shall be represented by Ordinary
Shares with respective rights as set forth in Part I below, and other
classes or series of Shares with respective rights to be determined
upon the creation thereof by action of the Directors from time to time
as set forth in Part II below.
1.4 Article 4(a) of the Articles shall be amended by deleting in its entirety
"Part I--Callable Preferred Shares" and by renumbering "Part II--Ordinary
Shares" as "Part I--Ordinary Shares" and "Part III--Other Classes or
Series of Shares" as "Part II--Other Classes or Series of Shares."
1.5 The officers of the Company are authorized and directed to do or cause to
be done any and all such acts and things and execute and deliver any and
all such documents and papers as they may deem necessary or appropriate to
carry out the purposes of the foregoing resolutions.
<PAGE>
EXHIBIT B
ACE LIMITED SPECIAL RESOLUTION NO.
Amendment of Amended and Restated Articles of Association
RESOLVED, that
1.1 Article 33 of the Company's Amended and Restated Articles of Association
shall be amended as set forth below:
33. In lieu of or apart from closing the register of Members, the
Directors may fix in advance a date as the record date for any such
determination of Members entitled to notice of or to vote at a meeting
of the Members and for the purpose of determining the Members entitled
to receive payment of any dividend.
1.2 The officers of the Company are authorized and directed to do or cause to
be done any and all such acts and things and execute and deliver any and
all such documents and papers as they may deem necessary or appropriate to
carry out the purposes of the foregoing resolutions.
<PAGE>
ACE LIMITED
The ACE Building
30 Woodburne Avenue
Hamilton HM 08 Bermuda
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Brian Duperreault, Christopher Z. Marshall,
Peter Mear and Keith P. White as Proxies, each with the power to appoint his
substitute, and hereby authorizes each of them to represent and to vote, as
designated below, all the Ordinary Shares of ACE Limited which the undersigned
is entitled to vote at the Annual General Meeting to be held on 6 February 1998
or any adjournment thereof.
(Continued on Reverse)
<PAGE>
ACE LIMITED
P.O. BOX 11138
NEW YORK, N.Y. 10203-0138
A. Election of Directors
For Election to Term Expiring in 2000: Thomas J. Neff
For Election to Term Expiring in 2001: Brian Duperreault, Robert M. Hernandez,
Peter Menikoff, Glen M. Renfrew, Dermot F. Smurfit and Robert Ripp
For _____ Withheld _____ Exceptions* _____
*Exceptions __________________________
To vote your shares for all Director nominees, mark the "For" box on Item A. To
withhold voting for all nominees, mark the "withheld" box. If you do not wish
your shares voted "For" a particular nominee, mark the "Exceptions" box and
enter the name(s) of the exception(s) in the space provided.
B. Proposal to Amend the Company's Memorandum of Association and Amended and
Restated Articles of Association to increase the Company's authorized share
capital and thereby effect a three-for-one stock split of the Company's
Ordinary Shares.
For _____ Against _____ Abstain _____
C. Proposal to Amend the Company's Amended and Restated Articles of Association
to clarify the setting of record dates in respect of shareholder meetings
and payments of dividends.
For _____ Against _____ Abstain _____
D. Proposal to ratify the appointment of Coopers & Lybrand L.L.P. as the
Company's independent accountants for the fiscal year ending 30 September
1998.
For _____ Against _____ Abstain _____
In their discretion, the Proxies are authorized to vote upon such other further
business, if any, as lawfully may be brought before the meeting.
If you have either an Address Change or Comments on the other side of the card,
mark here.
Address Change and/or Comments Mark Here _______
When signing as attorney, as executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full corporate
name by President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
DATED _______________, 199__
SIGNED _________________________
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder.
If no direction is made, this proxy will be voted for the nominees listed above
and for the ratification of accountants.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign.
Votes must be indicated (x) in Black or Blue ink. -
Sign, Date and Return Proxy Card Promptly Using the Enclosed Envelope.
