2013/3/8 - A.M. Best Affirms Ratings of The Chubb Corporation and Its Subsidiaries

The ratings reflect the 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, which is demonstrated by its consistent outperformance of industry peers. The ratings also recognize Chubb Group’s comprehensive and proactive enterprise risk management, disciplined underwriting practices, strong franchise recognition and access to the capital markets through Chubb Corp. The group’s positive rating attributes are enhanced by its position as a leading insurer in the United States and its global presence in specialty markets.

The strength of Chubb Group’s balance sheet is derived from its consistent generation of underwriting profits, despite the recent impact of catastrophes and competitive market conditions and a well-diversified book of business, which has led to excellent risk-adjusted capitalization. Chubb Group’s results also benefit from an above average total return on invested assets and strong underwriting and operating cash flows.

These positive rating factors are partially offset by challenging market conditions and catastrophe and weather-related losses, which have impacted underwriting performance in each of the last three years. Catastrophe losses added approximately six, nine and 10 points to the group’s combined ratios for 2010, 2011 and 2012, respectively. Management remains focused on limiting exposures through actively monitoring these risks and maintaining a prudent reinsurance program. In addition, the group has historically recognized adverse development of the loss reserves associated with its asbestos and environmental liabilities, although overall development of loss reserves has been favorable in recent accident and calendar years. Given Chubb Group’s leading market position, specialty niche underwriting focus, prudent balance sheet liquidity, strong cash flows and excellent risk-adjusted capitalization, A.M. Best considers it favorably positioned and sufficiently capitalized to absorb these challenges and those posed by the continued competitive market.

Chubb Atlantic’s ratings recognize its solid risk-adjusted capitalization and the implicit and explicit support provided by Chubb Corp. This financial support is evidenced by the capital contributions Chubb Corp. has made in recent years to support Chubb Atlantic’s operations, as well as the business of Chubb Atlantic’s 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 its quota share reinsurance assumed from affiliates.

These positive rating factors are partially offset by the volatility in Chubb Atlantic’s underwriting performance in prior years, largely due to adverse loss reserve development.

Chubb Corp.’s debt-to-tangible capital ratio is maintained at a modest 20% as of December 31, 2012. 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.

The FSR of A++ (Superior) and the ICRs of “aa+” have been affirmed for the following property/casualty subsidiaries of The Chubb Corporation:

• 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
• Chubb Atlantic Indemnity Ltd.

The following debt ratings have been affirmed

The Chubb Corporation—

-- “aa-” on $600 million 6.5% senior unsecured notes, due 2038

-- “aa-” on $600 million 5.75% senior unsecured notes, due 2018

-- “aa-” on $800 million 6.0% senior unsecured notes, due 2037

-- “aa-” on $275 million 5.2% senior unsecured notes, due 2013

-- “aa-” on $200 million 6.8% senior unsecured debentures, due 2031

-- “aa-” on $100 million 6.6% senior unsecured debentures, due 2018

-- “a” on $1 billion 6.375% junior subordinated debentures, due 2067

The following debt rating has been affirmed:

The Chubb Corporation—

-- AMB-1+ on commercial paper

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

The Chubb Corporation—

-- “aa-” on senior unsecured debt

-- “a+” on subordinated debt

-- “a+” on preferred securities

-- “a” on preferred stock

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Rating Natural Catastrophe Bonds”; “Analyzing Commercial Paper Programs”; “Catastrophe Analysis in A.M. Best Ratings”; “Insurance Holding Company and Debt Ratings”; “Equity Credit for Hybrid Securities”; “The Treatment of Terrorism Risk in the Rating Evaluation”; “Understanding BCAR for Property/Casualty Insurers”; “Understanding BCAR for Canadian Property/Casualty Insurers”; “Understanding Universal BCAR”; and “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2013 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Co.
Brian O’Larte, 908-439-2200, ext. 5138
Senior Financial Analyst
brian.o'larte@ambest.com
or
Jennifer Marshall, 908-439-2200, ext. 5327
Managing Senior Financial Analyst
jennifer.marshall@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com