Rating agency Fitch yesterday reaffirmed its debt ratings for Bermuda insurance giant ACE Ltd.

Fitch said it was affirming the long-term, short-term, senior debt, preferred stock and commercial paper ratings of ACE Limited (ACE) and its subsidiary ACE INA Holdings, Inc. (ACE INA).

The rating outlook was also said to be stable - or unlikely to change.

Looking at the reasons for its action, Fitch said: "The affirmations reflect the strong recovery in 2002 underwriting results following the 2001 underwriting loss that resulted largely from the events of September 11, 2001.

Fitch continued: "ACE has a history of generally good underwriting results. The ratings also consider ACE's progress in reducing the financial leverage that resulted when ACE INA purchased CIGNA's property/casualty operations in 1999. Through earnings and a series

of capital-market transactions, ACE reduced its financial leverage (adjusted debt-to-total capital, which gives partial equity credit

for hybrid securities) from a high of approximately 40 percent at year-end 1999 to 25 percent at September 30, 2002.

And the rating agency said it was taking into account ACE's "considerable exposure" to reinsurance recoverables and "significant asbestos and environmental reserve exposure that resulted from the ACE INA acquisition and the 1998 acquisition of Westchester Specialty".

But Fitch said it did not expect "reinsurance collectability problems in excess of the established allowance for doubtful accounts" and that it expected reinsurance purchased at the time of the ACE INA acquisition would be adequate to cover any "adverse development in prior accident years (including asbestos and environmental reserves) at ACE INA".

As for the company's future business prospects, Fitch said it expected that ACE would continue to benefit from improved insurance market conditions and continue to report a strong underwriting profit, although offset somewhat by lower investment yields.