Best Affirms ACE Belgian Sub ‘A’ Rating

November 17, 2003

A.M. Best Co. announced that it has affirmed the ‘A’ (Excellent) financial strength rating of ACE Europe’s Belgian subsidiary, ACE Insurance S.A. – NV, with a stable outlook.

“The rating reflects the company’s strategic importance to the ACE Group, excellent and improving risk-adjusted capitalisation, excellent business profile in the UK and continental Europe and prospective improvement in financial performance from 2003,” said Best. “A partially offsetting factor is the company’s heavy reliance on reinsurance and the impact that this has on liquidity.”

Best also noted that it had been informed that “the assets, liabilities and obligations of ACE Europe will be transferred to another ACE Group company in 2005, pending regulatory approval.”

The report indicated that ACE NV’s “risk-adjusted capitalisation remained excellent,” even though it had been “under pressure in 2002 as a result of growth and retained losses.” The parent group contributed $114 million in additional capital in 2002. Best indicated that it “expects further improvement in risk-adjusted capitalisation in 2003 and 2004 as a result of another capital contribution of USD 69 million at the beginning of 2003 and substantial net retained earnings in excess of EUR 100 million (USD 115 million) in each year, subject to normal loss experience.”

The bulletin also noted: “ACE Europe cedes over half of its gross written premium to reinsurers (57% in 2002 and approximately 53% expected in 2003), and although nearly half of the premium is ceded to ACE Group companies, has a significant reliance on the reinsurance market.” This also impacts the company’s current liquidity, said Best, “because of the high level of reinsured technical reserves. Current liquidity at year-end 2002 was low at 32.4%, although A.M. Best expects improvement in this ratio in 2003 and 2004 to approximately 50%.”

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