Reflects diversified global operation enhanced by prudent acquisitions
AM Best has revised the outlook of Ace Ltd and most of its subsidiaries to positive from stable and affirmed the financial strength ratings (FSR) of A+ (Superior) and issuer credit ratings (ICR).
The ratings for Ace’s core property/casualty operations reflect its strong risk-adjusted capitalisation, diversified global operation enhanced by prudent acquisitions in the past few years, and historically favourable record of generating strong earnings and cash flows.
The company’s core property/casualty operations’ balance sheet is strengthened by controlled financial leverage, a relatively conservative investment portfolio that generates stable earnings and favourable loss reserve development in recent years.
The positive rating factors are derived from management’s experience and consistent focus on underwriting profitability generated by effective risk selection and pricing standards, and maintenance of appropriate policy limits and exposure to catastrophes, including the use of reinsurance to manage net retentions.
Continued competitive pricing in the market, combined with a lower level of reserve redundancies and investment returns, require Ace to remain focused and diligent in executing pricing discipline, product and risk selection capability, and managing exposure levels to generate continued positive underwriting results.
Other offsetting rating factors include the group’s exposure to emerging asbestos and environmental claims and natural and man-made catastrophes. The operating companies’ capital is also exposed to varying dividend demands and higher than industry average ceded reinsurance leverage, driven by the nature of its business, its agricultural and captive/cash flow programmes, and recoverables relating to its run-off book.