A.M. Best has affirmed the financial strength rating
(FSR) of A++ (Superior) and the issuer credit ratings (ICR) of
“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 Group, ACE INA
Insurance (Canada) and ACE Tempest Re's parent, ACE Tempest
Life Reinsurance Ltd (ATLRE) (Bermuda).
Additionally, A.M. Best has affirmed the ICR and senior debt
ratings of “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 is
stable.
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 the 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,
including ACE Bermuda, ACE Tempest Re and ACE American Group
reflect their strong risk-adjusted capitalization, diversified
operations, historically favorable record of generating strong
underwriting earnings supported by consistently favorable loss
reserve development in recent years, a relatively conservative
investment portfolio that generates stable earnings and strong cash
flows. ACE INA Insurance (Canada) and ACE Seguros, benefit from the
adequate stand-alone levels of capital and the operational support
received by these entities from affiliates.
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. These subsidiaries further benefit from ACE’s
controlled financial leverage and strong enterprise risk management
(ERM) program, which relies on the 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 the stability of its risk-adjusted
capital levels and overall earnings that have remained strong and
consistent through soft market conditions, the global economic
challenges and the increase in global catastrophe and
weather-related events.
The increasing regulatory burden and 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 developing improved business models and operations
to support product and risk-selection capabilities, and manage
exposure levels to generate and maintain pricing discipline to
continue to generate 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 other non-catastrophe weather-related events. 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 first quarter of 2015, ACE's adjusted debt-to-total-capital
level was about 19.5%, which is within A.M. Best's expectations for
its current rating level. 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 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 trend of favorable
earnings, operating profile, and its established niche in the
middle-income market for supplemental individual accident and
health products.
A.M. Best believes the core group members are well-positioned at
their current rating levels and 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 ACE Limited.
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.
Key insurance criteria reports utilized:
- Catastrophe Analysis in A.M. Best
Ratings
- Rating Members of Insurance Groups
- Risk Management and the Rating Process
for Insurance Companies
- The Treatment of Terrorism Risk in the
Rating Evaluation
- Understanding BCAR for
Property/Casualty Insurers
- Equity Credit for Hybrid
Securities
- Understanding Universal BCAR
- Insurance Holding Company and Debt
Ratings
- Understanding BCAR for U.S. and
Canadian Life/Health Insurers
- Evaluating Country Risk
- A.M. Best's Perspective on Operating
Leverage
- Understanding BCAR for Canadian
Property/Casualty Insurers
This press release relates to rating(s) that have been
published on A.M. Best's website. For all rating information
relating to the release and pertinent disclosures, including
details of the office responsible for issuing each of the
individual ratings referenced in this release, please visit A.M.
Best’s Ratings & Criteria Center.
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 © 2015 by A.M. Best Company,
Inc. ALL RIGHTS RESERVED.
A.M. BestDarian Ryan, CPA, 908-439-2200, ext.
5449Senior Financial
Analyst–P/Cdarian.ryan@ambest.comorAnthony McSwieney,
908-439-2200, ext. 5715Senior Financial
Analyst–L/Hanthony.mcswieney@ambest.comorChristopher
Sharkey, 908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy,
908-439-2200, ext. 5644Assistant Vice President, Public
Relationsjames.peavy@ambest.com
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