Bermuda insurance giant ACE Ltd's diversity of business, excellent operating performance and strong market position have taken the business to the "upper tier of multinational companies.'' This is according to A.M. Best Co, a highly respected ratings agency used by individuals and brokers as a guide to the financial strength of a company. It is the oldest and considered the most authoritative insurance rating and information source.

Singled out for praise was Tempest Re, the company's reinsurance arm, bought up during the frenzy of buying seen by the company in the past two years.

The agency raised the financial strength rating of ACE Tempest Reinsurance Limited to A plus (Superior) from A (Excellent), reflecting the reinsurance division's contribution to the group.

A.M. Best does not give an overall rating to the company, but separate ratings for all the disparate members of the ACE Group of companies.

The report said: "The ratings reflect ACE Groups' substantial diversity of business lines and earnings, excellent operating performance and strong niche market position as a leading provider of large programme limits to upper tier multinational companies.'' The group, which is 15 years old this year and has as its chief executive officer Brian Duperreault, was praised for its management team and techniques.

"These strengths are derived from ACE's strong franchise as an international insurer and reinsurer, its outstanding management team and an operating strategy that emphasises strict underwriting, reserving and risk management discipline.

"Management has successfully executed the planned objective of reducing the debt level and lengthening the maturity profile following the 1999 acquisition of CIGNA P&C business (ACE INA) which was financed with short-term debt.'' The agency gave the `A' senior unsecured debt rating for ACE INA Holdings, and the `A minus' trust preferred securities rating for ACE INA Holdings and ACE Capital Trust I and II, have been affirmed and carried over.

ACE Financial Services' Capital Re Corporation has been assigned an `A minus senior unsecured debt rating while an `A minus' rating has been assigned to the trust preferred securities issued by Capital Re LLC.

The agency said total debt plus preferred currently stand at approximately 30 percent of capital, a ten percent reduction since the ACE INA acquisition.

And it said the conversion of preferred securities into common shares within the next two years will further bolster financial flexibility.

The agency added: "A.M. Best believes superior profitability and declining debt levels will prospectively improve fixed charge coverage and expects the company will reduce its financial leverage--debt plus preferred to capital--in the near to intermediate term.'' And it said through the acquisition of ACE INA's domestic and international property/casualty operations, ACE has substantially expanded and broadened its geographic platform, with the international operations offering unique growth opportunities.

It added: "A.M. Best believes ACE has the intellectual capital to meet the growing demands of the marketplace and the vision of management to execute its business strategies. A.M. Best views the rating outlook as stable.'' The only word of caution was that these strengths were "partially offset by the elevated level of financial leverage albeit declining'', risks associated with the ACE INA acquisition and the company's venture into financial products.

But it said that while financial leverage is at the upper bounds of its rating category, A.M. Best expects that ACE will continue to reduce its debt to a level that is more representative of its peers.