Ace Reassures Over Sub-Prime Exposure

by Stewart Douglas

Story link: Ace Reassures Over Sub-Prime Exposure

Insurance giant Ace Group has today announced that its sub-prime exposure is under control, with a view to allaying shareholder worries of the current extent of its liability to the now defunct sector, according to its earnings report for the last period released today.

According to the offshore insurance giant and its earnings report for the last period, Ace said that it had cut back on its sub-prime exposure by almost 50% in a bid to mitigate any further damages which could deplete reserves.

Chief officer Philip Bancroft said that the extra disclosure offered to shareholders was a move designed to increase transparency in light of the current credit crisis and harsh market conditions.

“Our investment portfolio is conservatively managed with a high average credit quality of AA and a duration of 3.6 years. Quarter-to-date, the overall marked-to-market effect on our fixed income portfolio is positive.”

The problems have arisen from Ace’s investment in the sub-prime sector, which provided loans to consumer borrowers with a less than perfect credit rating. However as US interest rates steadily rose, so too did the number of defaults in the sub-prime mortgage sector leading to underlying liquidity problems and the following credit crunch.

As a result, many sub-prime assets are now completely worthless, which has seen problems in the Ace investment portfolio to the concern of Ace shareholders prior to the earnings report released today.

It remains to be seen whether the reassurance offered by Ace Group will be sufficient to allay fears from the shareholders of the company, and whether they will be able to surmount the hurdles of the sub-prime mortgage sector and the credit crunch.