Fitch Ratings Affirms ACE Ltd. & Subsidiaries Debt Ratings.Business Editors CHICAGO--(BUSINESS WIRE)--Nov. 8, 2002 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed the long-term, short-term, senior debt, preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. and commercial paper ratings of ACE Limited (NYSE NYSE See: New York Stock Exchange : ACE) and its subsidiary ACE INA Ina (ē`nä), city (1990 pop. 60,062), Nagano prefecture, central Honshu, Japan, on the Tenryu River. It is an agricultural and industrial center with a famous agricultural school. Holdings, Inc. (ACE INA). The Rating Outlook is Stable. A list of the ratings are provided at the end of this release. The affirmations reflect the strong recovery in 2002 underwriting results following the 2001 underwriting loss that resulted largely from the events of September 11, 2001. ACE reported a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). combined ratio of 94.4% through September 30, 2002 compared 111.7% in full-year 2001. ACE has a history of generally good underwriting results. Prior to 2001, ACE had reported a combined ratio under 100% for six consecutive years. The ratings also consider ACE's progress in reducing the financial leverage that resulted when ACE INA purchased CIGNA's property/casualty operations in 1999. Through earnings and a series of capital-market transactions, ACE reduced its financial leverage (adjusted debt-to-total capital, which gives partial equity credit for hybrid securities) from a high of approximately 40% at year-end 1999 to 25% at September 30, 2002. Fitch's ratings recognize that ACE has considerable exposure to reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. recoverables. ACE also has significant asbestos and environmental reserve exposure that resulted from the ACE INA acquisition and the 1998 acquisition of Westchester Specialty. Additionally, ACE's ratio of intangible equity to common equity is relatively high due to material intangible asset Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. balances, primarily for goodwill and deferred acquisition costs. Fitch expects that ACE will continue to benefit from improved insurance market conditions and will continue to report a strong GAAP underwriting profit Underwriting profit is a term used in the insurance industry. It consists of the earned premium remaining after losses have been paid and administrative expenses have been deducted. It does not include any investment income earned on held premiums. offset somewhat by lower investment yields. Fitch also expects earnings-based fixed-charge coverage ratio Fixed-Charge Coverage Ratio A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated as the following: will continue to remain above 3 times. Fitch anticipates ACE's tangible equity and financial leverage will continue to improve as a result of earnings and as hybrid securities are retired or are converted into equity. Fitch does not anticipate any significant acquisitions in the near term. Additionally, Fitch does not expect reinsurance collectability problems in excess of the established allowance for doubtful accounts Allowance for Doubtful Accounts An estimation made by a company and documented on its balance sheet for receivables that might go uncollected. Notes: It is standard practice for a company to have funds set aside for money that cannot be collected. . Fitch also expects reinsurance purchased at the time of the ACE INA acquisition will be adequate to cover any adverse development in prior accident years (including asbestos and environmental reserves) at ACE INA. The individual ratings affirmed are listed below. Entity/Issue/Type Action Rating/Outlook ACE Limited --Long-term rating Affirm 'A'; --Short-term rating Affirm 'F1'; --Senior debt Affirm 'A'; --Cumulative redeemable preferred shares Affirm 'A-'; --Commercial paper Affirm 'F1'. ACE INA Holdings, Inc. --Long-term rating Affirm 'A'; --Short-term rating Affirm 'F1'; --Senior debt Affirm 'A'; --Commercial paper Affirm 'F1'. ACE Capital Trust I --Trust Preferred Securities Affirm 'A-'. ACE Capital Trust II --Capital Securities Affirm 'A-'. The ACE Group of Companies is one of the world's largest providers of property and casualty insurance and reinsurance. Headquartered in Bermuda, ACE provides a diversified range of products and services to clients in nearly 50 countries around the world. |
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