On Friday, A.M. Best announced that the rating agency upgraded the financial strength rating (FSR) of the North American property/casualty subsidiaries of ACE Limited to “A++” from “A+,” also raising the issuer credit ratings (ICR) to “aa+”.
Best cited the strong risk-adjusted capitalization of the P/C subsidiaries, as well as the diversified global operation in support of the rating boost, noting that global diversification “has been enhanced by prudent acquisitions over the past few years.”
Best also said a favorable historical record of generating strong earnings and cash flows factored into the decision to up the rating.
A.M. Best also similarly upgraded ACE Bermuda Insurance Ltd., ACE Tempest Reinsurance Ltd., the members of the ACE American Pool, ACE INA Insurance (Canada) and ACE Tempest Re’s parent, ACE Tempest Life Reinsurance Ltd.
The outlook for all the ratings was revised to stable from positive.
The announcement about the rating actions referred to “management’s experience and consistent focus on underwriting profitability generated by effective risk selection and pricing standards, and maintenance of appropriate policy limits and exposure to catastrophes, including the use of reinsurance to manage net retentions.”
“ACE’s strong enterprise risk management (ERM) program relies on close collaboration of executives and operating departments to identify, assess and control enterprise risk and accumulations,” the A.M. Best statement continued, adding that the effectiveness of the ERM program has been demonstrated by risk-adjusted capital levels and overall earnings that have remained strong and consistent through soft market conditions, the global financial crisis and the increase in global catastrophe and weather-related events.
Offsetting these positive rating factors, the statement referenced continued competitive pricing conditions in the market, and also noted ACE’s lower level of reserve redundancies and investment returns—conditions that the Best reports suggests will require ACE to remain focused and diligent in executing pricing discipline, product and risk selection capabilities and managing exposure levels to generate continued positive underwriting results.
Other offsetting rating factors include the group’s exposure to emerging asbestos and environmental claims and natural and man-made catastrophes, Best said.
Source: A.M. Best