Following Fitch Ratings' standard review process, Fitch has affirmed the
ratings of ACE Limited and its subsidiaries (collectively, ACE). The
Rating Outlook is Positive. A complete list of ratings follows at the
end of this release.
The rating actions reflect ACE's continued strong operating performance,
balance sheet and financial flexibility, and diverse sources of revenues
and earnings. Partially offsetting these positives is the effect of
modestly rising accident-year combined ratios and the effect of
continued significant competition in the company's chosen markets.
Fitch expects that ACE's insurance and reinsurance losses from Hurricane
Sandy will be more of an earnings event rather than a capital event.
While the amount of loss is uncertain at this early stage, Fitch
anticipates the level to be manageable given the company's diverse
global book of business, strong capitalization and operating performance
with below average catastrophe losses through the first nine months of
2012, and conservative risk management.
ACE's operating performance is consistently strong, characterized by low
combined ratios with manageable catastrophe losses and consistent
favorable loss reserve development and stable investment income. The
company has reported a combined ratio under 100% for nine consecutive
The year-to-date combined ratio was 90.2% at Sept. 30, 2012 despite
experiencing $147 million of pre-tax crop insurance losses in the third
quarter and $127 million of pre-tax catastrophe losses including
reinstatements through nine months ending 2012. ACE reported a higher
combined ratio of 95.3% for the same period in 2011 due to $744 million
of catastrophe losses.
ACE reported net income of $1.94 billion and operating income of $2.1
billion for the first nine months of 2012, up from $805 million and $1.7
billion, respectively, for the same period in 2011. The increase in net
income was largely due to reduced catastrophe losses and a shift in
realized investment losses primarily related to mark to market
accounting in ACE's life reinsurance segment.
ACE has steadily grown its ordinary shareholders' equity with solid
earnings. As a result, shareholders' equity has increased by over 50%
since year-end 2007 and 11% since year-end 2011 to $27 billion through
Sept. 30, 2012. Tangible equity has grown in conjunction with the growth
in shareholders' equity and has more than tripled since 2001. Fitch also
notes that ACE, unlike many of its peers, has not repurchased a material
amount of shares during the current soft market other than to partially
offset potential dilution related to share-based compensation plans. No
shares were repurchased during the third quarter of 2012.
Additionally, Fitch has affirmed and withdrawn Century Indemnity
Company's (Century) Insurer Financial Strength (IFS) rating. The rating
of the ACE subsidiary is no longer considered by Fitch to be relevant to
the agency's coverage. Fitch's rating on Century reflects Fitch's view
that the company's importance to ACE is limited dueto its run-off
status and thin capitalization. Century maintains inactive operations
largely consisting of asbestos and environmental (A&E) reserves that are
Key rating triggers that may lead to an upgrade include continued strong
operating performance with a combined ratio consistently under 95%,
continued stockholders' equity growth, and maintaining a track record of
successful acquisition execution while managing financial leverage to
under 25% total debt to capital and run-rate leverage at or under 20%.
Fitch expects operating earnings-based interest and preferred dividend
coverage to remain at or above 10x, and for ACE's retention ratio (net
premium written to gross premium written) to increase over time to be
more in line with higher-rated peers.
Key rating triggers that may lead to a downgrade include a sustained
material deterioration in operating performance such that the combined
ratio is consistently unprofitable at over 100%, a significant reduction
in stockholders' equity that is not recovered in the near term, and
financial leverage consistently over 30%.
Potential for future acquisitions and the associated integration risks
and company profile changes could lead to pressure on the ratings,
depending on the acquisition details.
Fitch has affirmed the following ratings:
--Issuer Default Rating (IDR) at 'A+'.
ACE INA Holdings Inc.
--IDR at 'A+';
--$500 million senior notes due 2014 at 'A';
--$450 million senior notes due 2015 at 'A';
--$700 million senior notes due 2015 at 'A';
--$500 million senior notes due 2017 at 'A';
--$300 million senior notes due 2018 at 'A';
--$500 million senior notes due 2019 at 'A';
--$100 million senior debentures due 2029 at 'A';
--$300 million senior notes due 2036 at 'A'.
ACE Capital Trust II
--$300 million capital securities due 2030 at 'BBB+'.
ACE American Insurance Company
ACE Bermuda Insurance Limited
ACE Fire Underwriters Ins. Company
ACE Insurance Company of the Midwest
ACE Property and Casualty Insurance Company
ACE Tempest Reinsurance Limited
Agri General Insurance Company
Atlantic Employers Insurance Company
Bankers Standard Fire & Marine Company
Bankers Standard Insurance Company
Combined Insurance Company of America
Combined Life Insurance Company of New York
Illinois Union Insurance Company
Indemnity Insurance Company of North America
Insurance Company of North America
Pacific Employers Insurance Company
Westchester Fire Insurance Company
Westchester Surplus Lines Insurance Company
--IFS at 'AA-'.
Fitch has affirmed and withdrawn the following rating:
Century Indemnity Company
--IFS at 'B-'.
The Rating Outlook is Positive.
Additional information is available at 'www.fitchratings.com'.
The ratings above were solicited by, or on behalf of, the issuer, and
therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Hurricane Sandy: Sensitivity Analysis of Insured Loss Scenarios
Special Report' (Nov. 8, 2012);
--'Reinsurers Well Positioned to Withstand Hit from Sandy' Fitch Wire
(Nov. 5, 2012);
--'Insurance Rating Methodology' (Oct. 18, 2012).
Hurricane Sandy -- Sensitivity Analysis of Insured Loss Scenarios
Insurance Rating Methodology -- Amended
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'.
PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS
OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES
AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF
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