Fitch Affirms The Chubb Corporation's Ratings

CHICAGO--()--Fitch Ratings today affirmed 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.

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 2014 was just over $1 billion an approximate $400 million decline over the first half of 2013. The deterioration was partly due to higher catastrophes and both lower favorable reserve development and net investment income.

Chubb reported a consolidated GAAP underwriting combined ratio that deteriorated to 91.6% for the first half of 2014 compared to an 86.7% in first half 2013. On a segment basis personal lines underwriting results deteriorated the most in first half of 2014 which was led by homeowners which experienced higher fire and non-catastrophe weather related losses accounting for an almost 14 point differential year-over-year. In spite of the elevated claims homeowners produced an underwriting profit for the first half of 2014 as did all segments including commercial property and marine which was heavily impacted by a combination of large fire losses and some non-catastrophe weather related losses. CB generated a solid return on average equity of 12.3% for the first half 2014.

The company's financial leverage ratio was 17.7% at June 30, 2014 equivalent to the year-end 2013 level. Operating interest coverage remained strong at 10.9x for the first half of 2014. 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, 2014. Chubb's insurance subsidiary capital adequacy as measured by risk based capital, traditional operating leverage metrics, and Prism 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 ratings are sensitive to future increases in financial leverage or reductions in debt servicing capacity.

RATING SENSITIVITIES

Factors that could lead to consideration of a downgrade of Chubb's debt and IDR ratings include:

--Reduction in holding company liquid investments to less than $1 billion, sustained reductions in statutory fixed charge coverage below 5x-6x, or a sustained decline in GAAP interest coverage below 9x.

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.

Factors that could lead to an upgrade include:

--A material increase in capital strength such that GAAP operating leverage was 0.7x or lower accompanied by a Prism score of 'Extremely Strong'. However, given publicly traded companies' sensitivity around managing capital, this level of capitalization is unlikely.

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% 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:

--Chubb Atlantic Indemnity Ltd.;

--Chubb Custom Insurance Co;

--Chubb Indemnity Insurance Co.;

--Chubb Insurance Company of Australia Ltd.;

--Chubb Insurance Company of Canada;

--Chubb Insurance Company of Europe, S.E.;

--Chubb Insurance Company of New Jersey;

--Chubb Lloyds Insurance Company of Texas;

--Chubb National Insurance Co.;

--Federal Insurance Company;

--Great Northern Insurance Co.;

--Pacific Indemnity Co.;

--Executive Risk Indemnity, Inc.;

--Executive Risk Specialty Insurance Co.;

--Texas Pacific Indemnity Company;

--Vigilant Insurance Co.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (Nov. 13, 2013).

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723072

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=846394

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Contacts

Fitch Ratings
Primary Analyst
Gerald B. Glombicki, CPA
Director
+1 312-606-2354
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Greg Dickerson
Director
+1 212-908-0220
or
Committee Chairperson
Keith M. Buckley, CFA
Group Managing Director
+1 312-368-3211
or
Media Relations, New York
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Gerald B. Glombicki, CPA
Director
+1 312-606-2354
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Greg Dickerson
Director
+1 212-908-0220
or
Committee Chairperson
Keith M. Buckley, CFA
Group Managing Director
+1 312-368-3211
or
Media Relations, New York
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com