Best Affirms Chubb Group and Subsidiaries ‘A++’ Ratings

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A++’ (Superior) and issuer credit ratings (ICR) of “aa+” of the Chubb Group of Insurance Companies and its P/C members. Best also affirmed the ICR of “aa-“, senior debt ratings of “aa-“, the debt rating of “a” on junior subordinated debt, the indicative ratings on securities and the “AMB-1+” on the commercial paper of Chubb Group’s publicly traded holding company, The Chubb Corporation.

In addition, Best affirmed the FSR of ‘A++’ (Superior) and ICR of “aa+” of Chubb Atlantic Indemnity Ltd. , which is located in Bermuda. The outlook for all ratings is stable. All companies are domiciled in Warren, NJ, except where otherwise specified.

The ratings reflect Chubb Group’s “superior risk-adjusted capitalization, excellent underwriting and overall operating performance and the sustainable competitive advantages within its specialty and upscale personal insurance businesses,” Best explained. The ratings also recognize Chubb Group’s “comprehensive and proactive enterprise risk management, disciplined underwriting, strong franchise recognition and access to the capital markets through Chubb Corp.”

However the Group’s “historical adverse loss reserve development associated with its asbestos and environmental (A&E) liabilities,” remain an offsetting factor. “Given Chubb Group’s leading market position, specialty niche underwriting focus, prudent balance sheet liquidity, strong operating cash flows and excellent risk-adjusted capitalization,” Best said it considers the Group “favorably positioned and sufficiently capitalized to absorb these challenges and those posed by the continued competitive market.”

Chubb Atlantic’s ratings recognize its “solid capitalization and the implicit and explicit support provided by Chubb Corp,” Best continued. “This financial support is evidenced by the capital contributions in recent years to support Chubb Atlantic’s operations, as well as the business of its subsidiary, Chubb do Brasil Companhia de Seguros. Furthermore, Chubb Atlantic is the beneficiary of sizable irrevocable letters of credit issued by banks on behalf of Chubb Corp.”

The ratings also acknowledge Chubb Atlantic’s “strategic importance within the Chubb Group, including quota share reinsurance assumed from affiliates. As an offsetting factor Best cited Chubb Atlantic’s “volatility in underwriting performance in prior years, largely due to adverse loss reserve development.”

Chubb Corp.’s debt-to-total capital ratio is maintained at a modest 20 percent as of December 31, 2009. Despite the company’s ongoing share repurchase program, liquid assets at the holding company are expected to be maintained at a level more than sufficient to cover annual holding company expenses.

Best summarized the ratings and the companies to which they apply as follows:
The FSR of ‘A++’ (Superior) and ICRs of “aa+” have been affirmed for the Chubb Group of Insurance Companies and its following property/casualty members:
— Federal Insurance Company
— Chubb Custom Insurance Company
— Chubb Indemnity Insurance Company
— Chubb Insurance Company of Australia Limited
— Chubb Insurance Company of Europe SE
— Chubb Insurance Company of Canada
— Chubb National Insurance Company
— Executive Risk Indemnity Inc.
— Executive Risk Specialty Insurance Company
— Great Northern Insurance Company
— Pacific Indemnity Company
— Vigilant Insurance Company
— Chubb Insurance Company of New Jersey
— Chubb Lloyds Insurance Company of Texas
— Northwestern Pacific Indemnity Company
— Texas Pacific Indemnity Company

The following debt ratings have been affirmed:

The Chubb Corporation—
–“aa-” on $600 million 6.5 percent senior unsecured notes, due 2038 –“aa-” on $600 million 5.75 percent senior unsecured notes, due 2018 –“aa-” on $800 million 6.0 percent senior unsecured notes, due 2037 –“aa-” on $275 million 5.2 percent senior unsecured notes, due 2013 –“aa-” on $400 million 6.0 percent senior unsecured notes, due 2011 –“aa-” on $200 million 6.8 percent senior unsecured debentures, due 2031 –“aa-” on $100 million 6.6 percent senior unsecured debentures, due 2018 –“a” on $1 billion 6.375 percent junior subordinated debentures, due 2067

The Chubb Corporation—
“AMB-1+” on commercial paper

The following indicative ratings have been affirmed for securities under the shelf registration:

The Chubb Corporation—
–“a+” on preferred securities
–“a” on preferred stock
–“a+” on subordinated debt
–“aa-” on senior unsecured debt

Source: A.M. Best – www.ambest.com