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Fitch Rates ACE INA Holdings Inc.'s $700MM Sr. Debt Issue 'A'; Affirms All Ace Limited Ratings

^{Published on 2010-11-18 13:00:34 - Market Wire}
 

CHICAGO--([ BUSINESS WIRE ])--Fitch Ratings has assigned an 'A' rating to the $700 million of five-year senior debt issued today by ACE INA Holdings Inc. (ACE INA), a subsidiary of ACE Limited (NYSE:ACE). The new notes are fully and unconditionally guaranteed by ACE and are therefore based on ACE's 'A+' Issuer Default Rating (IDR). Fitch expects that the net proceeds from this new senior debt issuance will largely be used to repay various existing bank debt scheduled to mature over the next three years that currently totals approximately $655 million.

Additionally, Fitch has affirmed the ratings of ACE Limited and its subsidiaries (collectively, ACE) following year-to-date third quarter financial results. The Rating Outlook is Stable. A complete list of ratings follows at the end of this release.

Following the completion of ACE's financing plans, the company's pro forma Sept. 30, 2010 total debt to capital ratio will remain essentially unchanged at approximately 13% (equity-credit adjusted). Fitch views this as a reasonable amount of financial leverage for a company with ACE's cash flow and earnings profile.

Fitch's affirmation reflects ACE's recent strong operating performance, solid balance sheet and financial flexibility, and diverse sources of revenues and earnings. Partially offsetting these positives is the effect of modestly rising accident-year combined ratios and the effect of continued significant competition in the company's chosen markets.

Fitch views ACE's recent operating performance as strong characterized by improved investment performance and low combined ratios, reflecting modest favorable reserve development, and manageable catastrophe losses. ACE reported net income of $2.1 billion for the nine months ended Sept. 30, 2010 versus $1.6 billion for the same period in 2009 in the midst of a difficult economic environment and a competitive property/casualty market. The company reported continued strong underwriting profitability as evidenced by a combined ratio of 90.2% and for nine months ended Sept. 30, 2010.

ACE has steadily grown its ordinary shareholders' equity with solid earnings. As a result, ordinary shareholders' equity has increased by 93% since year-end 2005 to $22.8 billion at Sept. 30, 2010. Tangible equity has grown in conjunction with the growth in shareholders' equity and has more than tripled since 2001. Fitch also notes that ACE, unlike many of its peers, has not repurchased shares during the current soft market.

The rating actions also consider the results of Fitch's stress test results of ACE's investment portfolio. Fitch believes that these results demonstrate ACE's ability to withstand potential near-term investment losses and volatility without a material impact on its capitalization.

Rating drivers that may lead to an upgrade include consistent strong operating performance with a combined ratio consistently under 95%, material stockholders' equity growth, and a continued track record of successful acquisition execution while maintaining financial leverage under 25% total debt to capital.

Rating drivers that may lead to a downgrade include a sustained material deterioration in operating performance such that the combined ratio is consistently over 100% (unprofitable), a significant reduction in stockholders' equity that is not recovered in the near term, and financial leverage consistently over 30%.

Potential for future acquisitions and the associated integration risks and company profile changes could lead to both positive and negative pressure on the ratings, depending on the acquisition details.

Fitch has assigned the following rating:

ACE INA Holdings Inc.

--$700 million senior notes 'A'.

Fitch has affirmed the following ratings with a Stable Outlook:

ACE Limited

--Issuer Default Rating (IDR) at 'A+'.

ACE INA Holdings Inc.

--IDR at 'A+';

--$500 million senior notes due 2014 at 'A';

--$450 million senior notes due 2015 at 'A';

--$500 million senior notes due 2017 at 'A';

--$300 million senior notes due 2018 at 'A';

--$500 million senior notes due 2019 at 'A';

--$100 million senior debentures due 2029 at 'A';

--$300 million senior notes due 2036 at 'A'.

ACE Capital Trust II

--$300 million capital securities due 2030 at 'BBB+'.

ACE American Insurance Company

ACE Bermuda Insurance Limited

ACE Fire Underwriters Ins. Company

ACE Indemnity Insurance Company

ACE Insurance Company of the Midwest

ACE Property and Casualty Insurance Company

ACE Tempest Reinsurance Limited

Atlantic Employers Insurance Company

Bankers Standard Fire & Marine Company

Bankers Standard Insurance Company

Combined Insurance Company of America

Combined Life Insurance Company of New York

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

--Insurer Financial Strength Ratings (IFS) at 'AA-'.

Century Indemnity Company

--IFS at 'B-'.

Additional information is available at '[ www.fitchratings.com ]'.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (Aug. 13, 2010);

--'Non-Life Insurance Rating Methodology' (March 24, 2010);

--'Fitch's Approach to Rating Insurance Groups' (March 24, 2010);

--'Equity Credit for Hybrids and Other Capital Securities' (Dec. 29, 2009);

--'Rating Hybrid Securities' (Dec. 29, 2009).

Applicable Criteria and Related Research:

Insurance Rating Methodology

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547766 ]

Non-Life Insurance Rating Methodology

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=506369 ]

Fitchiii™s Approach to Rating Insurance Groups

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=506368 ]

Equity Credit for Hybrids and Other Capital Securities: Market Feedback and Fitch's Responses

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=291784 ]

Rating Hybrid Securities

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493086 ]

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