Standard & Poor’s has affirmed its ‘A’ insurer financial strength and counterparty credit ratings on Australia-based ACE Insurance Ltd. and removed them from CreditWatch with negative implications, as a result of similar action taken on parent ACE Ltd. The outlook is negative.
The ratings on ACE Insurance Ltd. benefit from its strategic importance to the Bermuda-based ACE group. “Removal of the CreditWatch with negative implications for ACE Insurance reflects the action taken on its parent,” said Craig Bennett, credit analyst, Financial Services Ratings.
The negative outlook on the ACE group reflects Standard & Poor’s view that near-term capital management pressures, sizeable goodwill, and material exposure to credit risk may burden earnings and financial strength, and may affect the rating over the intermediate to longer term.
ACE group’s removal from CreditWatch Negative follows the announcement by ACE Ltd. of plans to address capital adequacy concerns through an issue of U.S. $500 million perpetual preferred stock in the near term. This followed ACE Ltd.’s previous announcement that 2002 earnings would be reduced by U. S. $354 million in reference to its asbestos reserve strengthening, which had prompted the Standard & Poor’s CreditWatch action.
Standard & Poor’s continues to have concerns about the effect of the increased reserving on capital adequacy, coupled with the group’s increased leverage, growing credit risk, and its existing capital and risk management strategies.
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