S&P Revises ACE Outlook from Negative to Stable

April 27, 2004

Standard & Poor’s Ratings Services announced that it has revised its outlook on ACE Ltd. and its operating companies to stable from negative.

S&P also affirmed its “A+” counterparty credit and financial strength ratings on ACE Ltd.’s operating units aas well as the group’s “BBB+” counterparty credit and senior debt ratings.

“The ratings on ACE are based on a strong competitive position as a global and diversified property/casualty company, strong capitalization, and strong financial flexibility,” explained S&P credit analyst Damien Magarelli. “In addition, operating performance dramatically improved in 2003 and is a significant strength to the rating.”

S&P said, however, that there are “negative factors that will constrain the rating on ACE over the long-term. These include: “a high amount of reinsurance recoverables, a significant amount of runoff reserves, and a large amount of intangibles.”

Concerning the recent initial public offering of shares involved in the spin-off of Assured Guaranty Ltd., S&P noted that “ACE is expecting proceeds of almost $1 billion, and Standard & Poor’s views this additional financial flexibility as a strength to the rating; however, ACE is expected to utilize this capital to expand its international franchise.”

S&P said the stable outlook is “based on the view that earnings in 2004 will be another very strong year with a combined ratio of 88 to 90 percent. ACE’s combined ratio is not expected to improve further as the company is shifting its business profile to casualty and away from property. The additional financial flexibility due to the IPO funds of Assured Guaranty is expected to be utilized to strengthen ACE’s position in some international markets.

“ACE’s high amount of recoverables, asbestos and environmental (A&E) and runoff reserves, and intangibles will be long-term limiting factors in the rating.”

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