Best Assigns ACE/INA Debt ‘a-‘ Rating

May 11, 2006

A.M. Best Co. announced that it has assigned a rating of “a-” to ACE INA Holdings, Inc.’s $300 million 30-year 6.7 percent senior unsecured notes. The notes are guaranteed by ACE INA Holdings’ ultimate parent, Bermuda-based ACE Limited and are being issued under the company’s existing shelf registration.

ACE announced the debt issue on Tuesday (See IJ Website May 9). Standard & Poor’s assigned the issue its “BBB+” rating (See IJ Website May 10) The proceeds from the offering will be used to repay $300 million of 8.3 percent senior notes maturing on August 15, 2006. Best’s outlook on the notes is stable.

“The rating reflects ACE’s excellent earnings generating capability, management’s determined focus on underwriting profitability, well-defined and executed business strategies and decreased financial leverage,” said Best. “In 2005, operating results included rather modest levels of net reserve increases on core business lines, which has been factored into ACE’s ratings.” Best also indicated that it “expects management’s disciplined underwriting culture to cause the positive earnings momentum to continue. Noteworthy is management’s efforts to contain and reduce catastrophe exposure, which remains considerable through its diversified business segments.”

Best noted “that ACE’s consolidated financial leverage based on tangible capital has decreased to 21 percent (including trust preferreds) at December 31, 2005 mainly due to higher equity levels stemming from positive operating results. However, holding company cash needs remain considerable and continue to be principally funded with dividends from the Bermuda-based insurance subsidiaries. ACE Bermuda Insurance Ltd. and ACE Tempest Reinsurance Ltd. have shouldered the burden as being the primary sources of cash dividends to ACE. While ACE maintains significant regulatory dividend capacity from these two companies, that capacity is constrained by the need to maintain surplus levels consistent with the companies’ ratings.”

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