Standard & Poor’s Ratings Services said that its ratings and outlook on Belgium- based insurer ACE Insurance S.A.—N.V. will not be affected at this time by the company’s reported negative net income of $90.4 million for the year ended Dec. 31, 2001—a marked deterioration from the previous year and materially below S&P’s expectations.
The loss was largely the result of significant large claims incurred by ACE Europe’s U.K. property/casualty division. The European property/casualty and accident and health divisions remained on target. Consequently, the reported losses had a substantial effect on ACE Europe’s capital adequacy ratio, which fell below 100 percent according to S&P’s risk-based capital model for 2001.
ACE Ltd. (A-/Stable/A-2), the parent company of ACE Europe, has undertaken pointed initiatives to restore ACE Europe’s capital to a level that will be at least commensurate with the insurer financial strength rating on ACE Europe. Immediately before year-end 2001, financial year paid-in capital increased by $60.0 million, with a further $60.0 million subsequently contributed by ACE Ltd. in 2002.
Furthermore, ACE Ltd. has entered into an agreement with ACE Europe to supply further contingent capital as part of a capped net worth maintenance agreement. The explicit support agreements should ensure that ACE Europe’s prospective capitalization will remain at more than 125 percent of the required level in 2002, allowing for projected premium growth (already being experienced due to favorable insurance market conditions) and as a partial offset to any remaining loss ratio volatility.
As a result, S&P’s will take no rating actions against ACE Europe at this time. S&P’s will, however, review the ratings on ACE Ltd. and its respective subsidiaries, including ACE Europe, in the third quarter of 2002.
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