Fitch Ratings has reiterated the issuer default ratings (IDR) of “A+” for property and casualty insurer ACE Limited (ACE) and its subsidiaries. The outlook has been revised to positive from stable.
The IDR rating upgrade comes on the back of solid risk-adjusted capitalization, international exposure generating continued profitability and cash flow and a strong balance sheet.. These positives are partially offset by emerging asbestos and environmental claims, higher than industry average ceded insurance leverage and natural and man-made catastrophes.
Fitch Ratings also recognized the company’s strong operating results reflected by consistent premium and investment income growth over the last many years. ACE is also wise with its loss picks and has demonstrated a steady reserve surplus since the past six years. ACE’s combined ratio, which has remained at around 95% is also positive, with an industry combined ratio of above 100%.
Additionally, Fitch also acknowledges ACE’s strong capital profile characterized by a moderate debt ratio, consistent growth in shareholders equity and success in integrating acquisitions.
The ratings of ACE Tempest Life Reinsurance take into account solid capitalization and consistently improving operating performance.
Based on enhanced focus on operations generating higher returns, solid risk-adjusted capital position and a superior quality asset portfolio, the rating agency has reiterated its rating on ACE Life.
Despite the scaling up of ACE’s ratings, Fitch said that the company might face a reverse rating action in case its shareholder equity declines or combined ratio breaches 100%, or in case the company fails to integrate any acquisition successfully.
Recently, ACE’s peer Allstate Corp. (ALL) and its subsidiaries also saw its debt and credit ratings affirmed by Fitch Ratings.
The company also announced the launch of a new Public EntityLiability policy intended to counter the unique risks faced by public entities. The enhanced policy combines public officials’ liability and employment practices liability coverage with the benefits of a general liability and auto liability product, thus providing a comprehensive group of coverage in a single insurance solution.
Headquartered in Zurich, Switzerland, ACE Limited retains a Zacks #2 Rank, which translates into a short-term Buy rating. However, considering the fundamentals, we maintain our long-term Neutral recommendation on the stock.
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