Fitch Affirms The Chubb Corporation's Ratings

Mon Aug 19, 2013 5:44pm EDT

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(The following statement was released by the rating agency) CHICAGO, August 19 (Fitch) Fitch Ratings affirms all ratings for The Chubb Corporation (NYSE: CB; Chubb), including the 'AA-' Issuer Default Rating (IDR) and 'A+' senior debt rating. Fitch has also affirmed the 'AA' Insurer Financial Strength ratings (IFS) of Chubb's property/casualty insurance subsidiaries, which are led by Federal Insurance Company (Federal). The Rating Outlook is Stable. A complete list of ratings is provided at the end of this release. KEY RATING DRIVERS Fitch's affirmation of the current ratings reflect Chubb's market position as a leading property/casualty insurer, history of favorable underwriting performance, strong capital position at both the insurance subsidiary and parent holding company levels, and conservative investment portfolio. Chubb's operations are segmented into personal, commercial and specialty operations, each of which has a track record of consistent strong underwriting profitability. The company's pretax operating income for the first half of 2013 was $1.4 billion, a $300 million improvement over first half of 2012. The improvement was due to improved accident year underwriting results, more favorable reserve development, and lower catastrophes, this was modestly offset by lower investment income. The company reported a consolidated GAAP underwriting combined ratio of 86.7% for the period with catastrophes accounting for 4.3 points to the combined ratio. The annualized GAAP return on reported equity ratio was 15.8% in the first half of 2013. The company's financial leverage ratio was 18.5% at June 30, 2013 which was down slightly from 20.2% at year-end 2012. Operating interest coverage (excluding realized investment gains) remains highly favorable at 13.8x for the first half of 2013. Chubb has significant resources available for debt servicing needs as the parent holding company held approximately $2 billion of cash and other liquid assets at June 30, 2013. The company's insurance subsidiaries have paid $634 million in dividends to the holding company as of June 30, 2013 and could pay an additional $930 million to the parent holding company without prior regulatory approval. Chubb's insurance subsidiary capital adequacy as measured by risk based capital, traditional operating leverage metrics, and Fitch's Prism capital model remains very strong. Chubb's debt ratings currently benefit from narrower notching from the IFS rating due to lower leverage, strong interest coverage, and significant liquidity at the holding company. The existing debt rating is sensitive to future increases in financial leverage or reductions in debt servicing capacity. RATING SENSITIVITIES Factors that could lead to consideration of a ratings downgrade include: --A significant level of near-term earnings volatility which is outside the historical average. --A material weakening of operating company capital quality, through either a deterioration in loss reserves or asset values. --Significant reductions in holding company liquid investments, declines in statutory maximum dividend coverage below 5x-6x, or a fall in interest coverage consistently below 9x would lead to more traditional notching in Chubb's ratings with the debt ratings moving down by one notch. Factors that could lead to an upgrade include: --Sustained stronger profitability, especially relative to peers at the current rating level and the industry aggregate, over the business cycle. --Sustained conservatism within the company's overall risk management, catastrophe profile, liquidity and capitalization, at both the holding company and operating company. Fitch has affirmed the following ratings with a Stable Outlook: The Chubb Corporation --IDR at 'AA-'; --5.75% senior notes due May 2018 at 'A+'; --6.6% notes due August 2018 at 'A+'; --6.8% debentures due November 2031 at 'A+'; --6.0% senior notes due 2037 at 'A+'; --6.5% senior notes due May 2038 at 'A+'; --6.375% junior subordinated debentures due 2067 at 'A-'; --Short-term IDR at 'F1+'; --Commercial paper at 'F1+'. Fitch has affirmed the following IFS ratings at 'AA' with a Stable Outlook: Chubb's Property/Casualty Insurance subsidiaries: --Federal Insurance Company; --Chubb Custom Insurance Co; --Chubb Indemnity Insurance Co.; --Chubb National Insurance Co.; --Great Northern Insurance Co.; --Pacific Indemnity Co.; --Vigilant Insurance Co.; --Executive Risk Indemnity, Inc.; --Executive Risk Specialty Insurance Co.; --Chubb Insurance Company of Europe, S.E.; --Chubb Insurance Company of Canada; --Chubb Insurance Company of Australia Ltd.; --Chubb Atlantic Indemnity Ltd.; --Texas Pacific Indemnity Company; --Northwestern Pacific Indemnity Company; --Chubb Insurance Company of New Jersey; --Chubb Lloyds Insurance Company of Texas. Contact: Primary Analyst Gerald B. Glombicki, CPA Director +1-312-606-2354 Fitch Ratings, Inc. 70 West Madison Street Chicago, IL 60602 Secondary Analyst Greg Dickerson Director +1-212-908-0220 Committee Chairperson Keith M. Buckley, CFA Group Managing Director +1-312-368-3211 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available at 'www.fitchratings.com'. Applicable Criteria and Related Research: --'Insurance Rating Methodology' (Aug. 19, 2013). Applicable Criteria and Related Research: Insurance Rating Methodology here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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