A.M. Best Places ACE Ltd.'s Rating Under Review Amid Acquisition of Cigna Corp.'s Propteutary Insurance Business

Strategic Insights -

A.M. Best Co., a leading credit rating agency, has placed the A+ rating of ACE Ltd. under review with developing implications, following its announcement to acquire Cigna Corp.'s domestic and international property insurance businesses for $3.45 billion in cash. This significant transaction solidifies ACE's position as a leading global property insurance organization with considerable diversification by geography, customers, and products.

Key Takeaways:

  • ACE Ltd.'s A+ rating is under review with developing implications, reflecting the company's increased financial leverage and potential changes to its business and capital plans.
  • The acquisition of Cigna Corp.'s property insurance business for $3.45 billion in cash will significantly increase ACE's financial leverage, which was modest before the acquisition.
  • A.M. Best expects most of the bank debt to be replaced with more permanent financing, including common and equity-like preferred securities, improving ACE's financial leverage and potentially affirming its A+ rating.
  • The transaction will provide ACE with immediate access to one of the largest domestic commercial insurers and a top international property insurance franchise, with a global customer base spread across 47 countries.
  • INA Pool's A- rating has been placed under review with positive implications, reflecting expected improvements to its stable operating results, maintenance of excellent capitalization, and advantages of being owned by a parent focused on the property insurance business.
  • The uncertainty of residual financial ties to Cigna's run-off operation and asbestos and environmental liabilities will be reduced by an expected third-party aggregate reinsurance loss cover being afforded to Brandywine before the transaction closes.
  • A.M. Best expects INA's underwriting results to improve through reduced corporate overhead charges, strategic decisions on underperforming business lines, and more cost-effective reinsurance protection.

Statistics:

  • $3.45 billion: The purchase price of Cigna Corp.'s domestic and international property insurance businesses.
  • 47: The number of countries where ACE's global customer base is spread.
  • A+: The A.M. Best rating placed under review for ACE Ltd.
  • A-: The rating given to INA Pool, Cigna's active operation.
  • B+: The rating given to Brandywine Group, Cigna's run-off operation.

Sources:

  • A.M. Best Co. (1999, Jan 12). A.M. Best Places ACE Ltd.'s Rating Under Review Amid Acquisition of Cigna Corp.'s Propteutary Insurance Business.