KEY RATING DRIVERS
Fitch views the transaction favorably due to the increased size and scale of the combined entity which is estimated to write roughly
The combined company's rating strengths include a strong balance sheet position and financial flexibility with moderate leverage and diverse sources of revenues and earnings with the advantages of increased global size and scale and strong management teams.
Both legacy ACE and legacy Chubb's operating performance consistently exceeded peers, characterized by low combined ratios with manageable catastrophe losses, consistent favorable loss reserve development and stable investment income from strong operating cash flow. However, past performance is no indication of future success.
For analytical purposes Fitch utilizes pro forma 2016 figures that treat the acquisition as if it took place on
To fund this transaction legacy ACE raised
Operating fixed charge coverage was 9.0 times (x) as of
Key current rating triggers that may lead to an upgrade include:
--Given increased market position size and scale, demonstration of continued strong operating performance consistent with the individual performance of legacy entities;
--A reduction in financial leverage to a run-rate level of approximately 20% or lower;
--Operating fixed charge coverage approximating 15x;
Key rating triggers that may lead to a downgrade include:
--A material deterioration in operating performance such that the combined ratio is consistently less profitable at over 95%;
--A significant reduction in stockholders' equity that is not recovered in the near term;
--Increase in financial leverage ratio to a sustained level of over 27%;
--Failure to execute acquisition integration plans as expected resulting in material economic impact on the company.
Fitch has affirmed the following ratings:
--Issuer Default Rating (IDR) at 'A+'.
--IDR at 'A+';
ACE Fire Underwriters Ins. Company
Federal Insurance Company
--IFS at 'AA'.
The Rating Outlook is Stable.
Fitch has withdrawn the 'AA' IFS Rating with a Stable Outlook for the following entities as they no longer exist:
Additional information is available at 'www.fitchratings.com'.
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James B. Auden, CFA
Source: Fitch Ratings