S&P’s placed its “A-/A-2” counterparty credit rating on ACE Ltd. on CreditWatch with negative implications due to ACE’s announcement that it will strengthen its asbestos reserves by $2.18 billion (gross) ($516 million net; $354 million after taxes). S&P’s also placed on CreditWatch negative its “A+” counterparty credit and financial strength ratings on the various members of the ACE Group and its “BBB” counterparty credit and financial strength ratings on the members of the Brandywine Group.
The CreditWatch action reflects S&P’s concerns about the group’s capital adequacy, accumulated credit risk to reinsurance recoverables, and the managed run-off of historical liabilities. Although management of these areas has progressed well, and bad debt reserves were increased as part of the current charge, S&P’s remain concerned with the rapid growth of reinsurance credit exposure on ACE’s balance sheet and the prior-year loss-estimate uncertainties that remain within certain business segments.
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