A.M. Best has upgraded the issuer credit ratings (ICR) to “aaa” from “aa+” and affirmed the financial strength rating (FSR) of A++ (Superior) 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 upgraded the ICR to “aa” from “aa-”, all long-term debt and indicative ratings of Chubb Corp. Additionally, A.M. Best has affirmed the debt rating of the AMB-1+ on the commercial paper of Chubb Group. The outlook for the ICR and all debt ratings has been revised to stable from positive, with the exception of the commercial paper, which does not have an outlook. The outlook for the FSR is stable. A.M. Best also has affirmed the FSR of A++ (Superior) and the ICR of “aa+” of Chubb Atlantic Indemnity Ltd. (Chubb Atlantic) (Pembroke, Bermuda). The outlook for Chubb Atlantic’s ratings is stable. (See below for a detailed listing of the companies and ratings.)

The ratings reflect Chubb Group’s superior risk-adjusted capitalization, excellent underwriting, overall operating performance and the sustainable competitive advantages within its standard and specialty commercial and upscale personal insurance businesses, as 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 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 results, despite the impact of catastrophes in 2010-2012, and competitive market conditions. Additionally, the group benefits from a well-diversified book of business, which has led to its superior level of 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 other weather-related losses, which have impacted Chubb Group’s underwriting performance in three out of the past five years. Catastrophe losses added approximately six, nine, 10 and four points to the group’s combined ratios for 2010, 2011, 2012 and 2014, respectively. Management remains focused on limiting exposures through actively monitoring these risks and maintaining a prudent reinsurance program. The effectiveness of these efforts has been demonstrated by the group’s favorable underwriting results, including in the aforementioned years when catastrophe losses were significant. 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 the majority of the 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 strong level of 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 since 2002, to support the operations of Chubb Atlantic. Furthermore, Chubb Atlantic is the beneficiary of sizable irrevocable letters of credit issued by banks on behalf of Chubb Corp.

The ratings also reflect Chubb Atlantic’s strategic importance within 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 earlier years, largely due to adverse loss reserve development.

Chubb Corp’s debt-to-tangible capital ratio was a modest 18% as of Dec. 31, 2014. 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.

Negative rating actions could result if Chubb Group’s operating performance or risk-adjusted capitalization falls markedly short of A.M. Best’s expectations.

The ICRs have been upgraded to “aaa” from “aa+” and the FSR of A++ (Superior) has 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
  • Texas Pacific Indemnity Company

The following debt rating has been affirmed:

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

The following debt ratings have been upgraded:

The Chubb Corporation—
- to “aa” from “aa-”on $600 million 6.5% senior unsecured notes, due 2038
- to “aa” from “aa-”on $600 million 5.75% senior unsecured notes, due 2018
- to “aa” from “aa-”on $800 million 6.0% senior unsecured notes, due 2037
- to “aa” from “aa-”on $200 million 6.8% senior unsecured debentures, due 2031
- to “aa” from “aa-”on $100 million 6.6% senior unsecured debentures, due 2018
- to “a+” from “a” on $1 billion 6.375% junior subordinated debentures, due 2067

The following indicative ratings on securities available under the shelf registration have been upgraded:

The Chubb Corporation—
- to “aa” from “aa-”on senior unsecured debt
- to “aa-” from “a+” on subordinated debt
- to “aa-” from “a+” on preferred securities
- to “a+” from “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. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

  • Analyzing Insurance Holding Company Liquidity
  • Catastrophe Analysis in A.M. Best Ratings
  • Equity Credit for Hybrid Securities
  • Insurance Holding Company and Debt Ratings
  • Rating Members of Insurance Groups
  • Rating Natural Catastrophe Bonds
  • Risk Management and the Rating Process for Insurance Companies
  • The Treatment of Terrorism Risk in the Rating Evaluation
  • Understanding BCAR for Canadian Property/Casualty Insurers
  • Understanding BCAR for Property/Casualty Insurers
  • Understanding Universal BCAR

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.

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

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