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), ACE Bermuda Insurance (ACE Bermuda), ACE Tempest Reinsurance (ACE Tempest Re), the members of the ACE American Pool, ACE INA Insurance and ACE Tempest Re’s parent, ACE Tempest Life Reinsurance Ltd (ATLRE).
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, 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 and Combined Life Insurance Company of New York.
A.M. Best has also affirmed the FSR of A- (Excellent) and ICR of “a-” of ACE Life Insurance Company and the FSR of A (Excellent) and ICR of “a” of ACE Seguros S.A. The outlook for these ratings is stable.
The ratings for the core property/casualty subsidiaries of ACE reflect their strong risk-adjusted capitalisation, diversified global operation enhanced by prudent acquisitions over the past few years and the historically favourable 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 favourable 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) programme 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 consistent through soft market conditions, the global financial crisis and the increase in global catastrophe and weather-related events.
At 31 December 2013, ACE’s adjusted debt-to-total-capital level was 17.5 percent (excluding accumulated other comprehensive income), which is within A.M. Best’s expectations at current rating levels.
While A.M. Best has claimed that 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.
