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23 Mar 2007
Moody's changes ACE USA's outlook to positive
New York, March 23, 2007 -- Moody's Investors Service announced today that it has affirmed the A2
insurance financial strength ratings of the ACE American pool companies
led by ACE American Insurance Company and the Westchester Specialty operating
companies led by Westchester Fire Insurance Company (together "ACE
USA"). These insurance subsidiaries are ultimately owned
by ACE Limited (NYSE: ACE; senior debt rated A3/commercial
paper rated Prime-2). In the same action, Moody's
changed the ratings' outlook on ACE USA to positive from stable
reflecting strong underwriting results, operational improvements
made in recent years, and an improved financial position at those
entities. The outlook on the Ba3 insurance financial strength ratings
on Century Indemnity Company and Century Reinsurance Company (together
"Brandywine"), the US run off operations of ACE,
According to Moody's, the ratings on ACE USA reflect the group's
established position in the US commercial and specialty insurance market,
its improved operating performance and financial position in recent years,
and its affiliation with Bermuda-headquartered ACE. 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. These strengths are offset by significant
competitive pressures in most of the group's core business segments,
by significant exposure to natural and manmade catastrophes, by
substantial gross underwriting leverage and sizable reinsurance recoverables,
and direct and indirect exposures to asbestos, environmental and
other toxic tort liabilities through the runoff of the Brandywine segment.
Members of the ACE American pool companies provide an intercompany excess
of loss reinsurance agreement to Century Indemnity Company, a subsidiary
of Brandywine. At December 31, 2006, $146 million
of unused limit remained under the agreement. If the limit were
to be exhausted, ACE and ACE USA would not have a legal obligation
to fund these losses. Despite this fact, to the extent that
A&E reserves were to further develop adversely, Moody's
believes that this would represent a contingent liability to the overall
Moody's notes that absent primarily implicit parental support by
ACE, ACE USA's ratings would be lower.
The positive outlook reflects improvements in key profitability and risk
adjusted capital metrics at the ongoing operations on a stand alone basis.
In addition, while still a concern, Moody's expects
only moderate costs associated with future restructuring and funding of
Moody's noted that sustaining the meaningful improved core earnings (high
single digit returns on surplus) coupled with continued improvements in
risk adjusted capital could lead to a ratings upgrade. Other factors
that could prompt an upgrade include: higher levels of parental
capital support, adjusted gross underwriting leverage below 7x,
and manageable costs associated with A&E funding. Conversely,
the outlook could return to stable in the event that earnings and capitalization
weaken, adverse reserve development on core reserves exceed 5%
of total reserves, significant adverse development on latent liabilities
within the ACE group of companies, and adjusted gross underwriting
leverage above 8x.
In addition, Moody's has withdrawn the A2 insurance financial
strength ratings on ACE Insurance Co. Ohio and ACE American Lloyds
Insurance Company, two former members of the ACE American pool.
Moody's has withdrawn the ratings on these entities because they have
been merged into ACE American Insurance Company. The obligations
of these two companies have been assumed by ACE American Insurance Company.
Moody's last rating action on the ACE American pool companies took
place on October 3, 2005, when Moody's confirmed the
A2 financial strength ratings. Moody's last rating action
on the Westchester Specialty operating companies took place on March 14,
2006, when Moody's upgraded the financial strength ratings
to A2 from A3.
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.
The ACE USA intercompany pool, led by ACE American Insurance Company,
a Pennsylvania company, specializes in US admitted commercial and
specialty lines while the Westchester Specialty companies, led by
Westchester Fire Insurance Company, a New York company, specialize
in US excess and surplus lines insurance. All companies are indirectly
wholly-owned subsidiaries of ACE Limited. Cayman Islands-domiciled
and Bermuda-headquartered ACE Limited 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
2006, ACE Limited reported total net premiums written of $12.0
billion and net income of $2.3 billion. As of December
31, 2006, shareholders' equity was $14.3
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
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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