Fitch Affirms The Chubb Corporation's Ratings

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 nine months of 2013 was $2.1 billion an approximate $300 million improvement over the first nine months of 2012. The improvement was due to higher underwriting income that was modestly offset by lower investment income.

The company's consolidated GAAP underwriting combined ratio improved to 86.4% for the first nine months of 2013 compared to a 90.1% for same period prior year. Similarly, Fitch estimates that the accident year GAAP combined ratio was 93% for first nine months of 2013 compared to a 94.7% for same period 2012, despite higher catastrophe losses in the current year. CB generated a solid return on average equity of 16.4% for the nine months ended 2013.

The company's financial leverage ratio was 18.3% at Sept. 30, 2013, which was down slightly from 20.2% at year-end 2012 helped mainly by the maturity of $275 million of 5.2% note on April 1, 2013. Operating interest coverage remained strong at 14.1x for the first nine months of 2013. Chubb has significant resources available for debt servicing needs as the parent holding company held approximately $1.9 billion of cash and other liquid assets at Sept. 30, 2013. The company's insurance subsidiaries have paid $964 million in dividends to the holding company as of Sept. 30, 2013 and could pay an additional $600 million to the parent holding company without prior regulatory approval for the remainder of the year. 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+';

--6.0% 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's Property/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'.

Applicable Criteria and Related Research:

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

Applicable Criteria and Related Research:

Insurance Rating Methodology -- Amended

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=815154

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Fitch Ratings
Primary Analyst
Gerald B. Glombicki, CPA, [phone]
Director
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
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Secondary Analyst
Greg Dickerson, [phone]
Director
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Keith M. Buckley, CFA, [phone]
Group Managing Director
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