Fitch Affirms The Chubb Corporation’s Ratings

CHICAGO--(BUSINESS WIRE)-- 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 rating list is shown below. The Rating Outlook is Stable.

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's is the 12th largest writer in the U.S. with diverse, profitable operations in commercial and personal lines and several specialty market segments.

Chubb's operating performance declined in the first nine months of 2011 due largely to above average catastrophe related losses, but profitability remains above industry norms. The company reported a consolidated GAAP underwriting combined ratio of 97.1% for the period compared with 90.1% for the same period in 2010. Losses from natural catastrophes that included Hurricane Irene, Spring Midwest storms, and earthquakes in Japan and New Zealand represented 11.7% of net earned premium in the 2011 period versus 7.1% in the prior year. Net income declined by 21% at 9M 2011 to $1.2 billion. This profit figure corresponds with a return on equity of 10.5%, and compares with a five-year average return on equity of 16.2% from 2006-2010.

The company's reported debt-to-total capital ratio was 20.3% at Sept. 30, 2011. Financial leverage is likely to decline modestly at year-end 2011 as $400 million of outstanding debt matured in November. Interest coverage remains highly favorable and was 9.6 times (x) for the first nine months of 2011 (8.0x excluding realized investment gains).

Chubb has significant resources available for debt servicing needs as the parent holding company held approximately $2.4 billion of cash and other liquid assets at Sept. 30, 2011. Statutory capital at Chubb's global insurance subsidiaries was approximately $14 billion at Sept. 30, 2011, down approximately 4% from the prior yearend due to parent company dividend payments. Chubb's capital adequacy as measured by risk based capital and traditional operating leverage metrics remains strong.

Chubb's debt ratings currently benefit from narrower notching from the IFS rating due to lower leverage and strong interest coverage. 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 current levels of 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 historical average;

--A material weakening of operating company capital quality, through either a deterioration in reserve or asset quality.

Chubb's rating could be considered for an upgrade under the following circumstances:

--A material improvement in the company's catastrophe risk profile;

--Sustained stronger profitability, especially relative to peers at the current rating level and the industry aggregate, over the business cycle;

--A significant change towards additional conservatism within the company's overall risk management, 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'sProperty/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.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (Sept. 22, 2011);

--'Rating Hybrid Securities' (July 28, 2011).

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651018

Rating Hybrid Securities

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647091

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Fitch Ratings
Primary Analyst
James B. Auden, CFA
Managing Director
+1-312-368-3146
Fitch, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary AnalystGerald B. Glombicki, CPA
Director
+1-312-606-2354
or
Committee ChairpersonKeith M. Buckley, CFA
Group Managing Director
+1-312-368-3211
or
Media Relations:Brian Bertsch, +1-212-908-0549 (New York)
[email protected]

Source: Fitch Ratings