S&P Rates ACE Insurance (Switzerland) ‘A+’; Outlook Stable

November 4, 2008

Standard & Poor’s Ratings Services has assigned its ‘A+’ financial strength rating to ACE Insurance (Switzerland) Ltd. (AISL), a newly formed subsidiary of Switzerland-based insurance and reinsurance holding company ACE Ltd. S&P also affirmed its ‘A-‘ counterparty credit rating on ACE Ltd. The outlook on both ratings is stable.

“The rating on AISL is based on explicit support by the ACE group (ACE) through an unconditional guarantee provided by U.K.-based operating subsidiary ACE European Group Ltd. (A+/Stable/–),” explained credit analyst Laline Carvalho. “In addition, we expect that AISL will benefit from substantial intra-group reinsurance.”

AISL is the newly incorporated version of the previous Swiss branch of ACE European Group Ltd. The new company, which began operations on Nov. 1, 2008, will be capitalized at CHF 250 million ($214 million), and, S&P said, “will likely write a modest amount of commercial property/casualty insurance and reinsurance risks, primarily for Switzerland-based clients.

“The ratings on ACE are based on its very strong competitive position as a global and diversified property/casualty group and its strong financial flexibility, capitalization, and operating performance. Negative factors are ACE’s changing and increasing risk profile into new lines and geographic locations, high reinsurance utilization in certain lines, and high amounts of reinsurance recoverables, runoff reserves, and intangibles. However, for the group as a whole, these risks are decreasing.

“For full-year 2008, we expect that ACE’s underwriting results will remain strong. Capital adequacy should remain supportive of the rating. Debt leverage and debt plus preferred leverage will likely stay at less than 20 percent and 35 percent, respectively, over the medium term in support of nonstandard holding-company notching.”

Cavalho added: “If ACE continues with strong operating performance and demonstrates that its risk management will improve as prices soften and the risk profile continues to expand, we might revise the outlook to positive over the next 12 months.”

However, S&P added, “a positive outlook would need the support of a combined ratio near 92 percent (including any reserve charges), minimal asset impairments, and strong to very strong capital adequacy, while recoverable, intangible, and runoff reserve leverage continue to decrease. We could revise the outlook to negative if ACE were to experience significantly worse-than-expected operating performance, impairment charges in its investment portfolio, adverse reserve development, or a significant change in its competitive position or capitalization.

Source: Standard & Poor’s – www.standardandpoors.com

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