S&P takes Chubb Corporation ratings off watch, lowers them

Our Banking Bureau
07 April 2003

New York: Standard & Poor's (S&P) ratings services has removed from CreditWatch its long-term counter-party credit and senior debt ratings on Chubb Corporation and lowered them to A from A+ because it does not believe that Chubb's operating performance and capital strength support the former ratings.

The rating agency also said that it removed from CreditWatch its counter-party credit and financial strength ratings on Chubb's operating insurance companies and lowered them to AA from AA+. The outlook on all these companies is stable.

“In terms of operating performance, Chubb has had adverse loss experience across most of its business lines over the past three years (excluding 11 September 2001-related terrorism losses), which is somewhat uncommon for a company rated AA+,“ notes S&P credit analyst Michael Gross.

“Most recently, the company has been negatively affected by adverse loss experience in its speciality commercial lines (directors and officers liability, and errors and omissions liability) and its US homeowners line, which are lines of business that have historically been very profitable and that have differentiated Chubb's business profile,“ he adds.

Although these business lines' results are expected to improve, S&P believes that the consolidated benefit of Chubb's business and earnings diversity has been eroded somewhat by competitive pricing and terms, legal trends, and increased reinsurance costs.

Although operating performance in 2003 is expected to be very strong, S&P believes that Chubb needs to continue rate increases through 2003 across most business lines as well as more effectively manage its relatively high expense structure.