A.M. Best Assigns Debt Rating to ACE INA Holdings, Inc.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--June 3, 2004

A.M. Best Co. has assigned a rating of "bbb+" to ACE INA Holdings, Inc.'s (Philadelphia, PA) $500 million ten-year 5.875% senior unsecured notes. The notes are guaranteed by ACE INA Holding's ultimate parent, ACE Limited (ACE) (Bermuda) (NYSE: ACE), and are being issued under the company's existing shelf registration. Subsequent to this issue, there will be $425 million of remaining capacity under the shelf. Proceeds from the current offering will be used to repay $400 million of 8.2% senior notes maturing in August 2004 and to redeem $75 million of subsidiary trust preferred securities. The rating outlook is stable.

The rating reflects ACE's excellent consolidated operating performance, management's determined focus on underwriting profitability, well-defined and executed business strategies and decreased financial leverage. Operating results have included rather modest levels of net reserve increases on core business lines that were easily managed in 2003.

A.M. Best viewed favorably ACE's initial public offering (IPO) of ACE Guaranty Corp. and ACE Capital Re International Ltd. as it essentially decreased the company's exposure connected with the financial guaranty businesses, limiting the downside to the remaining 35% ownership investment. Proceeds from the IPO provided ACE with just over $1 billion of cash that was redeployed into ACE's core businesses, allowing improved surplus levels in various segments of ACE's property/casualty businesses, as well as increased financial flexibility over the near term. The additional capital was infused at a time when the company's business mix is shifting to a heavier proportion of casualty lines that carry a longer tail and higher loss ratios, which also applies to new business production. A.M. Best expects management's disciplined underwriting culture to cause the positive earnings momentum to continue as the new capital is utilized.

A.M. Best notes that ACE's consolidated financial leverage has decreased to 20% (including trust preferreds) at March 31, 2004, mainly due to higher equity levels stemming from positive operating results. However, holding company cash needs have not decreased and continue to be principally funded with dividends from the insurance subsidiaries. ACE Bermuda and ACE Tempest Re have shouldered the burden as being the primary sources of cash dividends to ACE. While ACE maintains significant regulatory dividend capacity from the two Bermuda-based companies, that capacity is constrained by the need to maintain surplus levels consistent with the companies' ratings. The $1 billion of IPO proceeds have allowed for significant financial flexibility in the near term, although any potential conflicts between holding company cash needs and surplus levels need to be monitored.

For a list of A.M. Best's debt ratings, please visit http://www.ambest.com/debtratings/.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.