ACE Limited : A.M. Best Affirms Ratings of ACE Limited and Its North America Property and Casualty Affiliates
06/12/2012| 04:25pm US/Eastern
A.M. Best Co. has affirmed the financial strength ratings (FSR)
of A+ (Superior) and issuer credit ratings (ICR) of "aa" of the North
America property/casualty subsidiaries of ACE Limited (ACE)
(Zurich, Switzerland) [NYSE: ACE], ACE Bermuda Insurance Ltd.
(ACE Bermuda), ACE Tempest Reinsurance Ltd. (ACE Tempest Re)
(both domiciled in Bermuda), the members of the ACE American Pool
and ACE INA Insurance (Canada). Concurrently, A.M. Best has
affirmed the ICR and senior debt ratings of "a" of ACE and ACE INA
Holdings Inc. The outlook for these ratings is stable.
Additionally, A.M. Best has upgraded the FSR to A+ (Superior) from A
(Excellent) and ICR to "aa" from "a+" of Penn Millers Insurance
Company following the initiation of its quota share reinsurance
agreement with ACE American Insurance Company on January 1, 2012.
The outlook for Penn Millers Insurance Company's ratings has been
revised to stable from positive.
The ratings of ACE Bermuda International Reinsurance (Ireland) Limited
have been withdrawn following its amalgamation into its affiliate, ACE
Bermuda International Insurance (Ireland) Limited.
The affirmation of the ratings for ACE's core property/casualty
operations reflects their strong risk-adjusted capitalization,
diversified global operation and consistently favorable record of
generating strong earnings and cash flows. ACE's balance sheet is
further strengthened by controlled financial leverage, a relatively
conservative investment portfolio that generates stable earnings and
favorable loss reserve development in recent years.
The positive rating factors are derived from management's consistent
focus on underwriting profitability generated by effective risk
selection and pricing standards, and maintenance of appropriate policy
limits and exposure to natural catastrophes, including the use of
reinsurance to manage net retentions. ACE's strong enterprise risk
management (ERM) program relies on close collaboration of executives and
operating departments to identify, assess and control enterprise risk
and accumulations. The effectiveness of the ERM program is demonstrated
by risk-adjusted capital levels and overall earnings that have remained
strong through soft market conditions, the global financial crisis and
the increase in global catastrophe and weather-related events,
especially in 2011.
Continued competitive pricing in the market, combined with a lower level
of reserve redundancies and investment returns, require ACE to remain
focused and diligent in executing pricing discipline, product and risk
selection capability, and managing exposure levels to generate continued
positive underwriting results. Other offsetting rating factors include
the group's exposure to emerging asbestos and environmental claims and
natural and man-made catastrophes, and higher than industry average
ceded reinsurance leverage driven by the nature of its business, mainly
its agricultural and captive/cash flow programs, as well as recoverables
relating to its run-off book.
ACE's debt-to-tangible capital ratio at March 31, 2012 remains
manageable at 22.1% (including trust preferreds and excluding AOCI),
well within A.M. Best's expectations at current rating levels. Interest
coverage also remained strong through the first quarter of 2012 at 12
times. Since ACE maintains substantial capital levels in its
Bermuda-based operations, little cash and liquid securities are held at
the ultimate holding company level. Therefore, holding company cash
flows necessary to meet shareholder dividend and debt service
requirements are principally met through dividends from the operating
companies. Given the significant holding company cash flow requirements,
there is a dependence on subsidiaries in multiple jurisdictions to
provide sufficient dividend cash flow.
While A.M. Best believes ACE and its operating companies are well
positioned at their current rating levels, a factor that may lead to
positive rating actions include continued strong underwriting and
operating performance that outperforms peers over time. However, factors
that could lead to negative rating actions include operating performance
falling short of A.M. Best's expectations or an erosion of surplus that
causes a decline in risk-adjusted capital to a level that no longer
supports current ratings.
For a complete listing of ACE Limited and its subsidiaries' FSRs, ICRs
and debt ratings, please visit www.ambest.com/press/061213ace.pdf.
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best's rating process and contains the different rating criteria
employed in the rating process. Key criteria utilized include:
"Catastrophe Analysis in A.M. Best Ratings"; "Rating Members of
Insurance Groups"; "Risk Management and the Rating Process for Insurance
Companies"; "Understanding Universal BCAR"; "Equity Credit for Hybrid
Securities"; "Insurance Holding Company and Debt Ratings";
"Understanding BCAR for Property/Casualty Insurers"; Understanding BCAR
for Canadian Property/Casualty Insurers"; and "The Treatment of
Terrorism Risk in the Rating Evaluation." Best's Credit Rating
Methodology can be found at found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS
A.M. Best Company
Darian Ryan, CPA, 908-439-2200, 5449
Lagomarsino, CFA, 908-439-2200, 5810
Assistant Vice President
Morrow, 908-439-2200, ext. 5378
Senior Manager, Public
Peavy, 908-439-2200, ext. 5644
Assistant Vice President,
© Business Wire 2012