Jan 22 - 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). A full list of ratings follows at the
end of this release.
The Rating Outlook is Stable.
RATING SENSITIVITY/KEY RATING DRIVERS
The ratings continue to 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 is the 13th largest writer
in the U.S. based on 2011 net written premiums. The company has significant
international operations as approximately 26% through nine months of 2012
revenues were generated outside of the U.S. Operations are segmented into
personal, commercial and specialty operations, each of which has a track record
of consistent strong underwriting profitability.
Chubb has generated favorable profitability over the last five years as
demonstrated by an average annual combined ratio of 89.9% from 2008 through nine
months of 2012, and an average operating return on equity of 14.1% for the same
period. The company's net earnings for the first nine months of 2012 improved
due largely to lower catastrophe losses. The company reported a consolidated
GAAP underwriting combined ratio of 90.1% for the period with catastrophes
accounting for 3.0 points to the combined ratio. This compares favorably to a
97.1% combined ratio for the first nine months of 2011 that had 11.7 points of
catastrophes. Net income for the first nine months of 2012 was $1.4 billion
which equates to a return on equity of 12.2%.
Fourth quarter 2012 results will be unfavorably affected by losses from
Hurricane Sandy. Chubb previously announced estimated Sandy net pretax losses of
$880 million or $570 million after tax which was approximately 3.6% of
consolidated GAAP equity at Sept. 30, 2012. Despite the losses incurred from
Sandy, the company is likely to still report a significant operating profit in
full year 2012.
The company's reported debt-to-total capital ratio was 20.2% at Sept. 30, 2012.
Operating interest coverage (excluding realized investment gains) remains highly
favorable at 12.1x for the first nine months of 2012. Chubb has significant
resources available for debt servicing needs as the parent holding company held
approximately $2.2 billion of cash and other liquid assets at September 30,
2012. The company also has significant insurance subsidiary statutory dividend
payment capacity to support parent holding company debt servicing obligations.
Chubb's insurance subsidiary capital adequacy as measured by risk based capital,
traditional operating leverage metrics, and Fitch's Prism capital model remains
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.
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.
Other factors that could lead to consideration of a ratings downgrade include:
--A significant level of near-term earnings volatility which is outside the
--A material weakening of operating company capital adequacy, through operating
losses, capital declines or a deterioration in reserve or asset quality.
Chubb's rating could be considered for an upgrade under the following
--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 with a Stable Outlook:
The Chubb Corporation
--IDR at 'AA-';
--5.2% notes due April 2013 at 'A+';
--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.