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17 Dec 2007
Moody's affirms ACE's ratings following announced CICA acquisition
$3.0 billion of securities affected.
New York, December 17, 2007 -- Moody's Investors Service has affirmed the A3 senior debt rating of ACE
INA Holdings, Inc. (ACE INA; senior debt unconditionally
guaranteed by ACE INA's indirect parent, ACE Limited (NYSE:
ACE; senior unsecured shelf at (P)A3)) and the insurance financial
strength ratings of ACE's property & casualty insurance operating
subsidiaries, including ACE Bermuda Insurance, Ltd and ACE
Tempest Reinsurance, Ltd, at Aa3. The affirmation follows
ACE's announcement that it is acquiring Combined Insurance Company
of America (CICA) and certain of its subsidiaries from Aon Corporation
(NYSE: AOC) for $2.4 billion. CICA is a leading
marketer of non-cancelable accident, life and supplemental
health insurance to individuals in the U.S. and Canada,
Western Europe as well as other countries. The acquisition will
be financed by a combination of available cash and to a lesser degree
new debt. The outlook for ACE's ratings is stable.
According to Moody's, the acquisition of CICA will increase
ACE's product and geographic diversification in more stable,
non natural catastrophe exposed lines of business. While ACE possesses
a very strong franchise in accident business, the combination with
CICA also adds new distribution capabilities. The financing of
the transaction will be an incremental negative from a financial flexibility
standpoint; however, Moody's notes that ACE's current
financial metrics are very strong and are not expected to decline meaningfully.
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.
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,
and its exposure to natural catastrophes and adverse claim trends.
In addition, to the extent that U.S. asbestos and
environmental reserves were to further develop adversely by an amount
in excess of the remaining intercompany limit, this would represent
a contingent liability to ACE.
Moody's current ratings reflect our expectations that the company's
earnings will be strong across all core franchises (return on average
equity will exceed 10% over the cycle); consolidated operating
leverage will continue to moderate, and no meaningful adverse core
reserve development including A&E liabilities (less than 5%
of carried reserves). In addition, the ratings contemplate
that financial leverage will be less than 30% with earnings coverage
of interest and preferred dividends of at least 8x.
The last rating action on the company occurred on February 5, 2007,
when Moody's assigned an A3 rating to ACE INA Holdings' $500 million
senior debt due 2017.
The following ratings have been affirmed with a stable outlook:
ACE Limited --subordinated debt at Baa1, preferred stock at
Baa2; senior unsecured shelf at (P)A3; subordinated unsecured
shelf at (P)Baa1; preferred stock shelf at (P)Baa2;
ACE INA Holdings Inc. -- senior unsecured debt at A3,
subordinated debt at Baa1, senior unsecured shelf at (P)A3;
subordinated shelf at (P)Baa1;
ACE Capital Trust II -- backed preferred securities at Baa1;
ACE Capital Trust III and IV -- backed preferred securities shelf
ACE Bermuda Insurance, Ltd - insurance financial strength
ACE Tempest Reinsurance, Ltd - insurance financial strength
The following ratings have been affirmed with a positive outlook:
ACE American Insurance Company -- - insurance financial strength
ACE Fire Underwriters Insurance Company - insurance financial strength
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
Atlantic Employers Insurance Co. - insurance financial strength
ACE Indemnity Insurance Company - insurance financial strength
ACE Insurance Co. Midwest - insurance financial strength
Bankers Standard Insurance Co. - insurance financial strength
Bankers Standard Fire & Marine Co. - insurance financial
strength at A2;
Illinois Union Insurance Company - insurance financial strength
Insurance Co of North America - insurance financial strength at
ACE Insurance Co. Illinois - insurance financial strength
Westchester Fire Insurance Co. - insurance financial strength
Westchester Surplus Lines Insurance Company - insurance financial
strength at A2.
ACE Limited, headquartered in Hamilton, Bermuda, is
engaged through its subsidiaries in providing insurance, reinsurance
and financial products and services to corporate and insurance company
clients on a global basis. As of September 30, 2007,
ACE Limited had consolidated assets of $72 billion and shareholders'
equity of $16 billion.
For more information, please visit www.moodys.com/insurance
Jeffrey S. Berg
Senior Vice President
Financial Institutions Group
Moody's Investors Service
Financial Institutions Group
Moody's Investors Service
No Related Data.
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