ACE Ltd. is suing Cigna Corporation for $218 million for alleged breach of contract, the company said yesterday.

Bermuda-based ACE Ltd. said it had filed suit in the US against Cigna for breach of contract arising from its acquisition of Cigna's property and casualty business last July.

ACE paid $3.45 billion for the business but contends that Cigna has withheld $48 million that ACE is entitled to under the tax sharing agreement that formed part of the acquisition agreement.

ACE also claims that financial statements provided by Cigna, "failed to fairly represent the financial condition of the acquired companies''.

A release from the company also holds that the financial statement impact of the items under dispute, has been reflected in its consolidated financial statements prior to September 30, 2000.

"The financial statement impact included adjustments to goodwill and other balance sheet items and was determined without including any amounts to be recovered from Cigna as a result of the lawsuit,'' the company said.

"Accordingly, the financial results for the quarter ended December 31, 2000 will not be impacted by the items included in the lawsuit.'' ACE is seeking a trial by jury in the US District Court Southern District of New York, where the suit was filed.

ACE's purchase of the Cigna units was seen as the single move which turned ACE into a global insurance company and put Bermuda on the map as a world insurance domicile.

The purchase also capped off a two-year buying spree by the company which saw it vault into one of the top 20 players in the US property and casualty market.

"We want to grow but in a very focused manner,'' ACE chief executive told The Royal Gazette then. "We want to diversify our company. If you don't grow at some point you disappear. We looked at the Cigna organisation and we saw in one place, in one organisation, a truly global company that was specialising and had taken the right underwriting steps.

"Therefore, putting that together with us moved us toward where we were trying to get to in a very quick way but in a way that was much easier than trying to buy companies on a country to country basis over the long haul.'' Cigna sold the units so that it coulod focus on the health insurance business.

ACE bought the operations, including Cigna's domestic and international property and casualty business, wth cash.

It was seen as creating an alliance in which ACE will offer corporate clients Cigna's group life, health, pension and managed care coverage. Cigna will in turn offer clients insurance products produced by ACE's property and casualty business.

ACE's shares closed down $2 at $40 on the New York Stock Exchange.