Fitch Affirms ACE Limited's Debt and IFS Ratings; Outlook Stable

Business Wire, May 28, 2008

CHICAGO -- Fitch Ratings has affirmed the ratings of ACE Limited and its subsidiaries (collectively, ACE). The Rating Outlook is Stable. See full rating list below.

These rating actions reflect ACE's recent strong operating performance, solid balance sheet and financial flexibility, and ACE's diverse sources of revenues and earnings. Partially offsetting these positives is Fitch's expectation of contracting underwriting margins related to heightened competition and reduced rates in many of ACE's lines of business.

Fitch views ACE's recent operating performance as strong characterized by low combined ratios, modest reserve development, and comparatively light catastrophe losses. ACE reported net income (net of preferred dividends) of $366 million at March 31, 2008 and record net income of $2.6 billion for the year ended Dec. 31, 2007 in the midst of a soft property/casualty market.

ACE has steadily grown its ordinary shareholders' equity through the first quarter of 2008 with solid earnings. As the result, ordinary shareholders' equity increased by 17% since year-end 2006 to $16.7 billion at March 31, 2008. Tangible equity has grown in conjunction with the growth in shareholders' equity and has more than tripled since 2001. Additionally, total reinsurance recoverable continues to decrease and financial leverage has declined steadily in recent years.

ACE INA Holdings Inc. recently issued $450 million of unsecured senior debt. Fitch expects that the net proceeds will help redeem the existing $575 million of perpetual preferred shares in June 2008. Fitch believes that, following the completion of ACE's financing plans, ACE's pro forma March 31, 2008 total debt to capital ratio of approximately 19% is well within an acceptable level for ACE's current rating category.

ACE's indirect subsidiaries, Century Indemnity Co. and Century Reinsurance Co. (collectively, Century) are inactive operations largely consisting of asbestos and environmental (A&E) reserves that are in run-off. Fitch believes that the inactive companies are very thinly capitalized and are exposed to A&E claims, which are long-tailed and notoriously difficult to quantify.

Fitch views Century's potential A&E exposure as an increasingly smaller component of ACE's overall exposures and believes that ACE would likely provide the support required to maintain the companies' current capital levels. As a result, Fitch has revised the rating outlook of Century to Stable from Negative.

Fitch has affirmed the following ratings with a Stable Outlook:

ACE Limited

--IDR at 'A ';

--$575 million preferred stock at 'A-'.

ACE INA Holdings Inc.

--IDR at 'A ';

--$100 million senior debentures due 2029 at 'A';

--$500 million senior notes due 2014 at 'A';

--$450 million senior notes due 2015 at 'A';

--$500 million senior notes due 2017 at 'A';

--$300 million senior notes due 2018 at 'A';

--$300 million senior notes due 2036 at 'A'.

ACE Capital Trust II

--$300 Capital Securities due 2030 at 'A-'.

ACE American Insurance Company

ACE Bermuda Insurance Limited

ACE Fire Underwriters Ins. Company

ACE Indemnity Insurance Company

ACE Insurance Company of the Midwest

ACE Property and Casualty Insurance Company

ACE Tempest Reinsurance Limited

Atlantic Employers Insurance Company

Bankers Standard Fire & Marine Company

Bankers Standard Insurance Company

Combined Insurance Company of America

Combined Life Insurance Company of New York

Illinois Union Insurance Company

Indemnity Insurance Company of North America

Insurance Company of North America

Pacific Employers Insurance Company

Westchester Fire Insurance Company

Westchester Surplus Lines Insurance Company

--Insurer Financial Strength Ratings (IFS) at 'AA-'.

Century Indemnity Company

--IFS at 'B-'.

Century Reinsurance Company

--IFS at 'CCC '.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.