Fitch Assigns ACE INA Overseas Insurance Co. Ltd. 'AA' IFS
CHICAGO -- May 31, 2013
Fitch Ratings has assigned its 'AA' Insurer Financial Strength (IFS) rating to
ACE INA Overseas Insurance Company Ltd. (AIOIC), a Bermuda domiciled, indirect
wholly owned insurance subsidiary of ACE Limited (ACE). The Rating Outlook is
Stable. A complete list of all ACE ratings follows at the end of this release.
KEY RATING DRIVERS
The rating rationale is based on AIOIC's position within ACE's organization
structure and the integral role AIOIC plays in ACE's global risk management
business operations, which under Fitch's group rating methodology supports the
inclusion of AIOIC within the existing ACE group IFS rating of 'AA'.
Fitch's decision to use its group rating methodology rather than a stand-alone
approach is a function of 1) ACE's willingness to provide support to AIOIC,
including an assessment of AIOIC's strategic importance to ACE, and support
between group members, and 2) ACE's ability to provide support to AIOIC,
including an assessment that ACE's financial flexibility and liquidity
position allows for shifting of resources throughout the organization as
necessary, and consideration of any external barriers that may restrict
movement of capital and resources between affiliates.
Fitch considers AIOIC to have a 'core' strategic importance to ACE. AIOIC is a
key and integral part of the group's business and strategy. The company's
primary role is to act as an affiliate reinsurer with respect to multinational
large account risk management business written by other ACE Limited companies,
including operations in Asia and Latin America. AIOIC has demonstrated a
history of success in supporting group objectives. Prospects for future
success are consistent with that of other core ACE companies, and many
synergies and complements exist between ACE's core companies and AIOIC.
ACE's ratings reflect the company's continued strong operating performance
despite competitive market conditions, strong balance sheet position and
financial flexibility with moderate leverage, and diverse sources of revenues
and earnings. 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.
Key rating triggers that may lead to an upgrade on a group, consolidated basis
include very strong operating performance with a combined ratio consistently
under 85%, material stockholders' equity growth, and maintaining a track
record of successful acquisition execution while managing financial leverage
to under 20% and run-rate leverage at or under 15%. Fitch expects operating
earnings-based interest and preferred 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 highly-rated peers.
Key rating triggers that may lead to a downgrade on a group, consolidated
basis include a sustained material deterioration in operating performance such
that the combined ratio is consistently less profitable at over 95%, a
significant 15%-20% reduction in stockholders' equity that is not recovered in
the near term, and financial leverage consistently over 25%. Potential for
future acquisitions and the associated integration risks and company profile
changes could lead to pressure on the ratings, upward or downward, depending
on the nature and size of the acquisition and corresponding integration risks.
Additionally, the following negative rating triggers could cause Fitch to
determine that AIOIC is no longer considered 'core' to ACE Limited, and thus
may have an effect on Fitch's ability or willingness to group the AIOIC rating
and result in a downgrade(s): Failure to maintain roughly 120% of AIOIC's
Bermuda Solvency Capital Requirement model (BSCR) Target Capital Level, or
emerging trends pointing to a change in ACE's strategy or company profile such
that AIOIC's importance to ACE is lessened or ACE does not support AIOIC as
necessary and as a result AIOIC is in a weaker financial or business position.
The disposal, sale, or placement into run off of a core affiliate will almost
always cause Fitch to re-evaluate its group assessment.
Fitch has assigned the following rating with a Stable Outlook:
ACE INA Overseas Insurance Company Ltd.
Fitch currently rates ACE Limited and related entities as follows:
--Issuer Default Rating (IDR) 'AA-'.
ACE INA Holdings Inc.
--$500 million senior notes due 2014 'A+';
--$450 million senior notes due 2015 'A+';
--$700 million senior notes due 2015 'A+';
--$500 million senior notes due 2017 'A+';
--$300 million senior notes due 2018 'A+';
--$500 million senior notes due 2019 'A+';
--$475 million senior notes due 2023 'A+';
--$100 million senior debentures due 2029 'A+';
--$300 million senior notes due 2036 'A+';
--$475 million senior notes due 2043 'A+'.
ACE Capital Trust II
--$300 million capital securities due 2030 'A-'.
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
The Rating Outlook is Stable.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (Jan. 11, 2013).
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Gretchen Roetzer, +1 312-606-2327
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
James B. Auden, CFA, +1 312-368-3146
Keith M. Buckley, CFA, +1 312-368-3211
Brian Bertsch, +1 212-908-0549
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