Company Website:
http://www.ambest.com
OLDWICK, N.J. -- (Business Wire)
A.M. Best has upgraded the financial strength rating (FSR) to A++
(Superior) from A+ (Superior) and the issuer credit ratings (ICR) to
“aa+” from “aa” of the North American 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, ACE INA Insurance (Canada) and ACE Tempest
Re’s parent, ACE Tempest Life Reinsurance Ltd (ATLRE) (Bermuda).
Additionally, A.M. Best has upgraded the ICR and senior debt ratings to
“a+” from “a” of ACE and its wholly owned downstream holding company, ACE
INA Holdings Inc., whose debt is fully guaranteed by ACE. The
outlook for all the above ratings has been revised to stable from
positive.
In addition, A.M. Best has affirmed the FSR of A+ (Superior) and the
ICRs of “aa-” of Combined Insurance Company of America (Glenview,
IL) and Combined Life Insurance Company of New York (Latham, NY)
(together known as the Combined companies). Additionally, A.M. Best has
affirmed the FSR of A- (Excellent) and ICR of “a-” of ACE Life
Insurance Company (Stamford, CT) and the FSR of A (Excellent) and
ICR of “a” of ACE Seguros S.A. (Panama). The outlook for these
ratings is stable. (Please see link below for a detailed listing of the
companies and ratings.)
The ratings for the core property/casualty subsidiaries of ACE reflect
their strong risk-adjusted capitalization, diversified global operation
enhanced by prudent acquisitions over the past few years and the
historically favorable record of generating strong earnings and cash
flows. The balance sheet for these core subsidiaries is 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 experience and
consistent focus on underwriting profitability generated by effective
risk selection and pricing standards, and maintenance of appropriate
policy limits and exposure to 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 and consistent through soft market conditions, the global
financial crisis and the increase in global catastrophe and
weather-related events.
Continued competitive pricing in the market, combined with a lower level
of reserve redundancies and investment returns, requires ACE to remain
focused and diligent in executing pricing discipline, product and risk
selection capabilities 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. The property/casualty
subsidiaries’ capital also is exposed to varying dividend demands and
higher than industry average ceded reinsurance leverage, driven by the
nature of their business, agricultural and captive/cash flow programs
and recoverables relating to their run-off book.
At December 31, 2013, ACE’s adjusted debt-to-total-capital level was
17.5% (excluding accumulated other comprehensive income), which is
within A.M. Best’s expectations at current rating levels. Interest
coverage also remained favorable. 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 dividends 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 the property/casualty
subsidiaries in multiple jurisdictions to provide sufficient dividend
cash flow.
The ratings of ATLRE reflect its ownership of ACE Tempest Re, which
accounts for the majority of the company’s financial profile and the
benefit of being part of the ACE organization.
Partially offsetting these positive rating factors is the potential
capital and operating volatility associated with ATLRE’s run-off
variable annuity reinsurance business as well as its limited life
reinsurance operations.
Although it is a very limited contributor to the ACE group of companies, ACE
Life Insurance Company’s(New York, NY) ratings recognize its
stable capitalization, along with a very conservative investment
portfolio that offers adequate liquidity to support the run-off of its
remaining U.S. life reinsurance business. Offsetting rating factors
include its nominal scope of operations and business profile, which is
currently in run off, and earnings volatility.
The ratings for the Combined companies reflect the benefits it receives
as members of the ACE organization, its consolidated financial strength,
operating profile, established niche in the middle-income market for
supplemental individual accident and health products and the level of
risk-based capital maintained at both entities.
While A.M. Best believes the core group members are well positioned at
their current rating levels, given the rating upgrades positive rating
movement is unlikely in the near term. Factors that could lead to
negative rating actions include operating performance falling short of
A.M. Best's expectations and/or an erosion of surplus that causes a
decline in risk-adjusted capital to a level no longer supporting the
current ratings.
For a complete listing of ACE Limited and its subsidiaries’ FSRs, ICRs
and debt ratings, please visit www.ambest.com/press/041106ace.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. Best’s Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
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 © 2014 by A.M. Best Company, Inc.ALL RIGHTS
RESERVED.
Contacts:
A.M. Best
Darian Ryan, CPA, 908-439-2200, ext. 5449
Senior
Financial Analyst
darian.ryan@ambest.com
or
Michael
Lagomarsino, CFA, 908-439-2200, ext. 5810
Assistant Vice
President
michael.lagomarsino@ambest.com
or
Rachelle
Morrow, 908-439-2200, ext. 5378
Senior Manager, Public
Relations
rachelle.morrow@ambest.com
or
Jim
Peavy, 908-439-2200, ext. 5644
Assistant Vice President,
Public Relations
james.peavy@ambest.com
Source: A.M. Best
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