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Rating Action:

MOODY'S CHANGES OUTLOOK OF ACE LIMITED (SENIOR DEBT AT A3) TO STABLE FROM NEGATIVE; CONFIRMS FINANCIAL STRENGTH RATINGS OF ACE'S PRIMARY US OPERATIONS

03 Oct 2005
MOODY'S CHANGES OUTLOOK OF ACE LIMITED (SENIOR DEBT AT A3) TO STABLE FROM NEGATIVE; CONFIRMS FINANCIAL STRENGTH RATINGS OF ACE'S PRIMARY US OPERATIONS

Approximately $2 Billion in Securities Affected.

New York, October 03, 2005 -- Moody's Investors Service announced today that it has changed the outlook for ACE Limited's (NYSE: ACE) debt ratings (senior debt at A3) to stable from negative. In the same action, Moody's confirmed the A2 insurance financial strength ratings (IFSR) of the ACE American pool companies and the Ba3 IFSR ratings of Century Indemnity Company and Century Reinsurance Company--all with a stable outlook. The IFSR confirmations conclude a review for possible downgrade initiated on January 5, 2005 at the time of the company's announcement that it would record a $298 million after-tax charge associated with the completion of its asbestos and environmental ("A&E") review.

Moody's said today's rating actions are supported by the company's improved capitalization and financial flexibility given the recently announced $1.25 billion common equity offering. Capitalization at the ACE American pool companies was also enhanced via a $400 million capital contribution from ACE Limited during the third quarter of 2005. In addition, Moody's rating action reflects its expectation of improved pricing conditions for commercial lines following the events of Hurricanes Katrina and Rita, which will allow ACE to continue to strengthen its balance sheet and provide further earnings growth opportunities.

Moody's notes that ACE's ratings reflect its solid competitive positions in its principal business segments; its diversified spread of risk and good internal liquidity; and its sound capitalization on a consolidated basis and increased financial flexibility. Moody's continues to believe that the Bermuda entities, where the majority of the capital is housed, will continue to support the US operations as well as the Lloyd's operations. On a standalone basis, the ratings of these non-Bermuda entities would be lower without this support. Management continues to seek ways to further the support arrangements, most notably via reinsurance, between the non-Bermuda operations and the Bermuda entities.

The rating agency said these fundamental strengths are tempered by challenges associated with managing an increasingly complex global operation, the intrinsic volatility of some of ACE's insurance and reinsurance businesses, its rapid growth in recent years, and its exposure to adverse claim trends on core reserves and A&E liabilities at ACE USA and Brandywine.

Moody's current ratings reflect its expectation of ACE's earnings strength across all core franchises (prospective pretax operating earning above $1.25 billion), moderating consolidated operating leverage, premium growth rates generally in line with industry peers, and no meaningful further A&E adverse development. In addition, the ratings contemplate financial leverage to be less than 25% with interest coverage above 5x and interest and preferred/common dividends coverage above 3x.

The rating agency also placed the A3 IFSR for Westchester Fire Insurance Company and Westchester Surplus Lines Insurance Company on review for possible upgrade. The review will focus on the increased interdependence of the Westchester operations with the ACE USA operations and ACE globally, as well as the earnings capacity of these entities relative to other excess & surplus insurance carriers.

In addition, Moody's lowered and will withdraw the rating on ACE American Reinsurance Company to B1 from Ba3. The B1 IFSR and withdrawal of ACE American Reinsurance Company is based on the expected completion of the sale of the company along with two other runoff reinsurance companies to Randall & Quilter Investment Holdings Limited. Please refer to Moody's Withdrawal Policy on moodys.com.

The following ratings have been affirmed with a stable outlook:

ACE Limited -- senior unsecured debt at A3, subordinated debt at Baa1, commercial paper at P-2;

ACE INA Holdings Inc. -- senior unsecured debt at A3, subordinated debt at Baa1, commercial paper at P-2;

ACE Capital Trust I -- backed preferred securities at Baa1;

ACE Capital Trust II -- backed preferred securities at Baa1;

ACE Bermuda Insurance, Ltd - insurance financial strength at Aa3;

ACE Tempest Reinsurance, Ltd - insurance financial strength at Aa3;

Lloyd's Syndicate 2488 - insurance financial strength at Aa3;

The following ratings have been confirmed with a stable outlook:

Allied Insurance Co. - insurance financial strength at A2;

ACE Employers Insurance Company - insurance financial strength at A2;

ACE Fire Underwriters Insurance Company - insurance financial strength at A2;

ACE Insurance Co. Ohio - insurance financial strength at A2;

ACE Insurance Co. Texas - insurance financial strength at A2;

ACE Property & Casualty Insurance Company - insurance financial strength at A2;

Indemnity Insurance Co. North America - insurance financial strength at A2;

Pacific Employers Insurance Co. - insurance financial strength at A2;

Atlantic Employers Insurance Co. - insurance financial strength at A2;

ACE Indemnity Insurance Company - insurance financial strength at A2;

ACE Insurance Co. Midwest - insurance financial strength at A2;

Bankers Standard Insurance Co. - insurance financial strength at A2;

Bankers Standard Fire & Marine Co. - insurance financial strength at A2;

Illinois Union Insurance Company - insurance financial strength at A2;

Insurance Co of North America - insurance financial strength at A2;

ACE American Lloyds Insurance Company - insurance financial strength at A2;

INA Surplus Insurance Company - insurance financial strength at A2;

ACE Insurance Co. Illinois - insurance financial strength at A2;

Century Indemnity Co. - insurance financial strength at Ba3;

Century Reinsurance Company - insurance financial strength at Ba3.

The following rating has been downgraded, assigned a stable outlook and will be withdrawn:

ACE American Reinsurance Company - insurance financial strength at B1.

The following ratings have been placed on review for possible upgrade:

Westchester Fire Insurance Co. - insurance financial strength at A3;

Westchester Surplus Lines Insurance Company - insurance financial strength at A3.

Cayman Islands-domiciled and Bermuda-headquartered ACE Limited (NYSE: ACE) is engaged through its subsidiaries in providing insurance, reinsurance and financial products and services to corporate and insurance company clients on a global basis. For the six months ended June 30, 2005, ACE Limited had total net premiums written of $6 billion and net income of $904 million. Total shareholders' equity at June 30, 2005 was $10.5 billion.

Moody's Insurance Financial Strength Ratings are opinions of the ability of insurance companies to repay punctually senior policyholder claims and obligations. For more information, visit our website at www.moodys.com/insurance.

New York
Jeffrey S. Berg
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Robert Riegel
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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