OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has placed under review with negative implications the financial strength rating (FSR) of A++ (Superior) and the issuer credit ratings (ICR) of “aaa” of the property/casualty subsidiaries of The Chubb Corporation (Chubb Corp) (headquartered in Warren, NJ) [NYSE: CB], also known as the Chubb Group of Insurance Companies (Chubb Group). Concurrently, A.M. Best has placed under review with negative implications the ICR of “aa”, all long-term debt and indicative ratings and the AMB-1+ on the commercial paper of Chubb Corp. Additionally, A.M. Best has placed under review with negative implications the FSR of A++ (Superior) and the ICR of “aa+” of Chubb Atlantic Indemnity Ltd. (Chubb Atlantic) (Pembroke, Bermuda). (See below for a detailed listing of the companies and ratings.)
The rating actions follow the recent announcement that the Board of Directors of ACE Limited (ACE) (NYSE: ACE) and Chubb Corp have each approved a definitive agreement under which ACE will acquire Chubb Corp for approximately $28 billion in cash and in shares of ACE. Each organization brings a solid reputation and strong history of favorable operating results to the merger. In addition, their business profiles are relatively complementary in terms of products offerings and customer focus, and the merger should allow each to broaden customer solutions by adapting the others’ products to their specific operations. ACE intends to finance the cash portion of the transaction through a combination of $9 billion of ACE and Chubb Corp cash plus $5.3 billion of senior notes. As a result, A.M. Best expects that risk-adjusted capitalization will be reduced and financial leverage increased for the merged enterprise as a result of this transaction. Additionally, there is significant execution risk associated with the transaction itself and with the operational consolidation that will be required to realize the efficiencies expected from the transaction. The negative outlook reflects the potential effect of these factors on the ratings following the close of the transaction, which is expected during the first quarter of 2016, pending approval of ACE and Chubb Corp shareholders, and regulators, as well as the expiration or termination of the applicable waiting period required under U.S. anti-trust regulation.
The FSR of A++ (Superior) and the ICRs of “aaa” have been placed under review with negative implications 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
- Texas Pacific Indemnity Company
The following debt ratings have been placed under review with negative implications:
The Chubb Corporation—
-- AMB-1+ on commercial paper
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 $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 indicative ratings on securities available under the shelf registration have been placed under review with negative implications:
The Chubb Corporation—
-- “aa” on senior unsecured debt
-- “aa-” on subordinated debt
-- “aa-” on preferred securities
-- “a+” on preferred stock
This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.
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