Fitch Expects to Rate ACE INA Holdings' $950MM Sr. Debt Issue 'A'

CHICAGO--()--Fitch Ratings expects to assign an 'A' rating to the $500 million and $450 million senior unsecured note issuance planned by ACE INA Holdings Inc., a subsidiary of ACE Limited (ACE). The new notes will be fully and unconditionally guaranteed by ACE and are therefore based on ACE's 'A+' Issuer Default Rating (IDR). Fitch expects that the net proceeds from this new senior debt issuance will refinance $950 million of existing debt maturing in 2014 and 2015.

On Nov. 13, 2012, Fitch affirmed all of its ratings for ACE and ACE's subsidiaries. The Rating Outlook is Positive. (A complete list of ratings follows at the end of this release.)

KEY RATING DRIVERS

The anticipated rating action reflects ACE's continued strong operating performance, balance sheet and financial flexibility, and diverse sources of revenues and earnings. Fitch views the debt issuance favorably since the debt will likely be issued at lower interest rates than the existing debt, and the maturities will be extended, eliminating near-term refinancing risk.

Following the completion of ACE's financing plans, the company's pro forma Dec. 31, 2012 total debt to capital ratio will temporarily increase modestly to roughly 17.9% from 15.6% until the expiring debt is paid off. Fitch views this as a reasonable amount of financial leverage for a company with ACE's cash flow and earnings profile. ACE's operating earnings-based interest coverage has been strong at 12.6 times (x) in 2012 and 2011, both years with large weather-related losses. Fitch's expectation is that the company's interest coverage will continue to be favorable in the near term.

RATING SENSITIVITIES

Key rating triggers that may lead to an upgrade include continued strong operating performance with a combined ratio consistently under 95%, continued stockholders' equity growth, and maintaining a track record of successful acquisition execution while managing financial leverage to under 25% total debt to capital and run-rate leverage at or under 20%. Fitch expects operating earnings-based interest and preferred dividend coverage to remain at or above 10x, and for ACE's retention ratio (net premium written to gross premium written) to increase over time to be more in line with higher-rated peers.

Key rating triggers that may lead to a downgrade include a sustained material deterioration in operating performance such that the combined ratio is consistently unprofitable at over 100%, a significant reduction in stockholders' equity that is not recovered in the near term, and financial leverage consistently over 30%.

Potential for future acquisitions and the associated integration risks and company profile changes could lead to pressure on the ratings, depending on the acquisition details.

Fitch expects to assign the following ratings:

ACE INA Holdings Inc.

--$500 million senior notes due 2023 'A';

--$450 million senior notes due 2043 'A'.

Fitch currently rates the ACE Limited companies as follows:

ACE Limited

--Issuer Default Rating (IDR) 'A+'.

ACE INA Holdings Inc.

--IDR 'A+';

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

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

--$700 million senior notes due 2015 'A';

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

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

--$500 million senior notes due 2019 'A';

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

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

ACE Capital Trust II

--$300 million capital securities due 2030 'BBB+'.

ACE American Insurance Company

ACE Bermuda Insurance Limited

ACE Fire Underwriters Ins. Company

ACE Insurance Company of the Midwest

ACE Property and Casualty Insurance Company

ACE Tempest Reinsurance Limited

Agri General Insurance Company

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

--IFS 'AA-'.

The Rating Outlook is Positive.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (Jan. 11, 2013).

Applicable Criteria and Related Research

Insurance Rating Methodology - Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=698731

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Contacts

Fitch Ratings
Primary Analyst
Gretchen Roetzer, +1-312-606-2327
Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
James B. Auden, CFA, +1-312-368-3146
Managing Director
or
Committee Chairperson
Keith M. Buckley, CFA, +1-312-368-3211
Managing Director
or
Media Relations:
Brian Bertsch, New York, +1 212-908-0549
Email: brian.bertsch@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Gretchen Roetzer, +1-312-606-2327
Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
James B. Auden, CFA, +1-312-368-3146
Managing Director
or
Committee Chairperson
Keith M. Buckley, CFA, +1-312-368-3211
Managing Director
or
Media Relations:
Brian Bertsch, New York, +1 212-908-0549
Email: brian.bertsch@fitchratings.com