A.M. Best reiterated the issuer credit ratings (“ICR”) and senior debt ratings of “a” of ACE Limited (ACE - Analyst Report) and ACE INA Holdings Inc. Concurrently, the rating agency reiterated the financial strength ratings (“FSR”) of A+ (Superior) and ICR of “aa” of the North America property/casualty subsidiaries of ACE Limited, ACE Bermuda Insurance Ltd., ACE Tempest Reinsurance Ltd, the members of the ACE American Pool and ACE INA Insurance.

The outlook remains stable.

Furthermore, A.M. Best revised the FSR to A+ (Superior) from A (Excellent) and ICR to “aa” from “a+’’ of Penn Millers Insurance Company. The outlook was downgraded to stable from positive.

The ratings reflect sustained underwriting profitability, which stemmed from the prudent selection of risk and pricing standards along with proper maintenance of policy limits and exposure to catastrophe activities.

A.M. Best noted that the success of ACE’s enterprise risk management (ERM) is reflected in the continued strong risk-adjusted capital levels and earnings despite the weak macro environment, financial turmoil and higher global catastrophe and weather-related events, particularly in 2011.

However, these positives are to some extent muted by asbestos and environmental claims and catastrophe loss exposure, higher ceded reinsurance leverage as compared to the industry average.

The rating agency believes that ACE should remain focused on implementing pricing discipline, be prudent in choosing product and risk capability, and control exposure levels so that it continues to deliver solid underwriting results

A.M. Best noted that ACE Limited’s debt-to-tangible capital ratio was 22.1% as on March 31, 2012, with interest coverage at 12x, which was within the agency’s standard for current rating levels.

We believe, the company’s strong ratings scores will help retain investor confidence and help it write more business going forward.

Subsequent to the merger of ACE Bermuda International Reinsurance (Ireland) Limited into ACE Bermuda International Insurance (Ireland) Limited, A.M. Best has withdrawn the ratings assigned to the former.

A.M. Best stated that it might consider positive ratings revision if ACE Limited continues to generate strong underwriting and operational results, which will outpace its peers over time.

Nevertheless, the ratings will be subject to downgrade if ACE Limited fails to meet A.M. Best's standards or surplus erodes resulting in lower risk-adjusted capital levels.

We retain our Neutral recommendation on ACE Limited. The quantitative Zacks #3 Rank (short term Hold rating) for the company indicates no clear directional pressure on the stock over the near term. The company competes with American International Group Inc. (AIG - Analyst Report) and The Travelers Companies Inc. (TRV - Analyst Report).