Ace Ltd. last night lost its place on the S&P 500 index after shareholders voted on its redomestication to Switzerland.

The news that MasterCard would replace the insurance giant in the closely watched bellwether of large-capitalisation US-listed companies came after the markets closed and sparked a five-percent plunge in the company's share price in late trading. Many institutional investors and funds that aim to track the S&P 500 will likely sell their Ace shares. After falling one percent in regular trading to $52.86, Ace lost another $2.86 (5.4 percent) by 6.53 p.m., Bermuda time, when the stock was trading at $50.

A statement from Standard & Poor's, released on PRNewswire last night, read: "Ace is in the process of changing its place of incorporation to Switzerland, thus rendering it ineligible for inclusion in the S&P US indices."

MasterCard will replace Ace in the index after the close of trading next Thursday. Ace will continue to trade on the New York Stock Exchange, after the likely completion of the redomiciling of its holding company from the Cayman Islands to Switzerland.

Yesterday's fall in Ace's share price follows a four-percent drop on Wednesday. On Tuesday Citigroup analyst Joshua Shanker said in a note that there was "a moderate probability that it could be removed from the S&P 500" if the redomestication was approved. Mr. Shanker suggested that as many as 45 million Ace shares could be sold by "indexers" and he cut his price target on Ace shares to $58 from $73. And the analyst predicted the stock could become volatile after the move becomes official.

As Ace warned in its May 30 prospectus, in a section on risks connected to the move: "If our shares are removed as a component of the S&P 500 or other indices, institutional investors attempting to track the performance of the S&P 500 or other such indices would likely sell our shares, which would likely cause our share price to decline."

Although Ace has been based in Bermuda for all of its 22 years of operation, it was incorporated in the Cayman Islands. The company announced in March this year its intention to redomicile, but said its Bermuda operations would be unaffected and its executive offices would remain at its Woodbourne Avenue building.

Russell has strict rules and removes companies from its indices after their reincorporation is final, typically on the day the deal closes.

In its prospectus Ace stated its belief that "we should qualify for continued inclusion in the S&P 500" after the move to Switzerland. Although S&P decided in the early 1990s to exclude foreign stocks, companies included in the 500 prior to that date have not been removed, the prospectus said. Ace believed it qualified for inclusion under that exception.

According to Standard & Poor's, components of the S&P 500 must derive a significant part of their revenue from the US, report financial results according to US accounting practices and have a corporate structure that meets US standards, and be considered a US company by investors and analysts. Ace also felt it qualified under that criterium.

Ace did not comment on the matter by press time last night.

The annual general meeting - likely to be Ace's last in Bermuda - is expected to conclude next Monday.