AM Best has upgraded the financial strength rating to A+ (Superior) from A (Excellent) and the issuer credit rating to “aa-” from “a+” on ACE European. The outlook for both ratings is stable.
The upgrades reflect Best's expectation that ACE European will maintain strong stand-alone risk-adjusted capitalisation between 2006 and 2008. In addition, the upgrades reflect the importance of the division to the ACE Group.
Best believes that ACE European is likely to achieve a good profit before tax in 2006, although significantly less than the very strong earnings of £242m achieved in 2005, which exceeded Best's expectations. In 2007, Best believes a solid combined ratio in the mid-90s is likely to be achieved. This anticipated decline in underwriting performance reflects softening market conditions in the company's main classes.
ACE European account is well diversified, with business written across three main divisions—ACE Europe, ACE Global Markets and ACE Tempest Re Europe—and continues to benefit from the transfer of business from Lloyd's Syndicate 2488.