(The following statement was released by the rating agency)
CHICAGO, May 14 (Fitch) Fitch Ratings has upgraded the ratings
of ACE Limited
and its subsidiaries (ACE) one notch. The senior debt ratings
were upgraded to
'A+' from 'A', the Issuer Default Ratings to 'AA-' from 'A+',
and the Insurer
Financial Strength (IFS) ratings to 'AA' from 'AA-'. The Rating
revised to Stable from Positive.
Fitch has also withdrawn the IFS ratings of subsidiaries
Company of America and Combined Life Insurance Company of New
York following the
ratings upgrade and revision to Stable Outlook. A complete list
follows at the end of this release.
KEY RATING DRIVERS
The rating upgrades reflect ACE's continued strong operating
competitive market conditions, strong balance sheet position and
flexibility with moderate leverage, and diverse sources of
earnings. All of Fitch's prior upgrade rating triggers have
been met and
surpassed in the current year and on a run-rate basis. Fitch
expects ACE to
maintain operations at this higher level going forward.
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 10 consecutive years.
The 2012 combined ratio was 93.9% despite experiencing $633
million of pre-tax
catastrophe losses including reinstatements and $147 million of
insurance losses. ACE reported a higher combined ratio of 94.7%
for 2011 due
primarily to $859 million of pre-tax catastrophe losses in a
industry-wide record-high losses.
ACE's insurance and reinsurance losses from Superstorm Sandy
million after tax represented an earnings event rather than a
Recent losses from natural catastrophe events relative to peers
demonstration of the benefits from the company's diverse global
business, strong capitalization, and risk management practices.
ACE reported net income of $2.7 billion and operating income of
$2.6 billion in
2012, up over 75% and 12% from $1.6 billion and $2.4 billion,
2011. This result corresponds with an operating return on
equity of 11.0% in
2012 and 10.6% in 2011. The increase in net income was largely
due to reduced
catastrophe losses and a shift in realized investment gains
primarily related to
mark-to-market accounting in ACE's life reinsurance segment.
Shareholders' equity has nearly doubled in the past five years
and 15% since
year-end 2011 to $27.9 billion through Mar. 31, 2013. Tangible
equity has grown
in conjunction with the growth in shareholders' equity and has
more than doubled
since 2008. Fitch also notes that ACE, unlike many of its peers,
repurchased a material amount of shares during the current soft
than to partially offset potential dilution related to
plans. The company repurchased a modest $7 million of shares in
2012 and $132
million in 2011.
The company's reported debt-to-total capital ratio was 15.6% at
Dec. 31, 2012,
which is consistent with Fitch's median sector credit factors
for the current
rating category. An increase in leverage to 17.7% as of March
31, 2013 was due
to the pre-funding of $950 million of debt coming due in 2014
Operating interest coverage (excluding realized investment
favorable at 12.6x for 2012. ACE has ample resources available
servicing needs with roughly $3.7 billion of cash and short-term
March 31, 2013. Significant additional flexibility is provided
subsidiaries that can pay nearly another $2.9 billion of
dividends to the
holding company without prior regulatory approval in 2013.
Fitch has withdrawn the Combined Insurance Company of America
and Combined Life
Insurance Company of New York IFS ratings as the ratings are no
considered by Fitch to be relevant to the agency's coverage.
Key rating triggers that may lead to an upgrade include very
performance with a combined ratio consistently under 85%,
equity growth, and maintaining a track record of successful
execution while managing financial leverage to under 20% and
at or under 15%. Fitch expects operating earnings-based interest
dividend coverage to remain at or above 15x, 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
deterioration in operating performance such that the combined
consistently less profitable at over 95%, a significant 15%-20%
stockholders' equity that is not recovered in the near term, and
leverage consistently over 25%.
Potential for future acquisitions and the associated integration
company profile changes could lead to pressure on the ratings,
downward, depending on the nature and size of the acquisition
Fitch notes that ACE's debt ratings currently benefit from
relative to the insurance company financial strength ratings as
a result of
Bermuda's moderate regulatory environment. This narrower
notching may be revised
in the future as Fitch evaluates the impact of Solvency II and
regulatory changes on Bermuda's insurance regime.
Fitch has upgraded the following ratings:
--Issuer Default Rating (IDR) to 'AA-' from 'A+'.
ACE INA Holdings Inc.
--IDR to 'AA-' from 'A+';
--$500 million senior notes due 2014 to 'A+' from 'A';
--$450 million senior notes due 2015 to 'A+' from 'A';
--$700 million senior notes due 2015 to 'A+' from 'A';
--$500 million senior notes due 2017 to 'A+' from 'A';
--$300 million senior notes due 2018 to 'A+' from 'A';
--$500 million senior notes due 2019 to 'A+' from 'A';
--$475 million senior notes due 2023 to 'A+' from 'A';
--$100 million senior debentures due 2029 to 'A+' from 'A';
--$300 million senior notes due 2036 to 'A+' from 'A';
--$475 million senior notes due 2043 to 'A+' from 'A'.
ACE Capital Trust II
--$300 million capital securities due 2030 to 'A-' from '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
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 to 'AA' from 'AA-'.
The Rating Outlook is Stable.
Fitch has upgraded and withdrawn the following ratings with a
Combined Insurance Company of America;
Combined Life Insurance Company of New York.
--IFS to 'AA' from 'AA-'.
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
James B. Auden, CFA
Keith M. Buckley, CFA
Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549,
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (Jan. 11, 2013).
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