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Rating Action:

MOODY'S AFFIRMS RATINGS OF THE CHUBB CORPORATION & SUBSIDIARIES (SENIOR DEBT AT A2), OUTLOOK CHANGED TO STABLE

02 Nov 2005
MOODY'S AFFIRMS RATINGS OF THE CHUBB CORPORATION & SUBSIDIARIES (SENIOR DEBT AT A2), OUTLOOK CHANGED TO STABLE

New York, November 02, 2005 -- Moody's Investors Service has affirmed the A2 senior debt rating of The Chubb Corporation, and the Aa2 insurance financial strength rating of its principal insurance subsidiaries, namely Federal Insurance Company and its affiliated pool members. The outlook for the ratings has been changed to stable from negative.

According to Moody's, the rating affirmation and stable outlook reflect the company's strong underwriting performance and cash flows, as well as its improved risk-adjusted capitalization and moderating holding company financial leverage profile. Moody's initiated the negative outlook in March 2004 on the basis of concerns regarding both observed past and potential future volatility arising out of the company's professional liability insurance segment (including financial institutions), as well as the potential for continued drag from asbestos-related claim losses.

Moody's noted that, since then, Chubb has experienced a reduced level of adverse development from executive liability protection insurance such as directors and officers and errors & omissions coverages written in recent years. This favorable trend, together with improved pricing fundamentals across most of its business lines, has contributed to robust core earnings and internal capital generation, which in turn have improved earnings coverage metrics and operational and financial leverage measures.

Chubb remains the acknowledged leader in high-end personal lines and executive protection insurance, and the Aa2 insurance financial strength ratings further reflect its commitment to underwriting and reserving discipline, strong customer service capabilities, and a favorable outlook for internal capital generation through business currently being written. Moody's added that these strengths are tempered by the intrinsic volatility of the group's core business segments -- including property/catastrophe exposures in its homeowners segment and exposure to liability-related claim severity in its executive liability business. Exposure to adverse claim development in runoff asbestos and environmental liabilities also remains a risk.

During the third quarter of 2005, Chubb reported net income of $246 million, net of an estimated $568 million pre-tax impact from third quarter catastrophes, primarily Hurricanes Katrina and Rita. Additionally, Chubb recently announced that it intends to exit its reinsurance assumed business segment by entering into an agreement for the formation of a new global reinsurer. From a strategic perspective, Moody's has always considered Chubb's involvement in assumed reinsurance to be opportunistic, rather than a core strategic business. Hence, the rating agency does not view the company's decision to exit this business as reducing its core franchise strength.

At the current rating level, Moody's expects that Chubb will maintain cash at the holding company of approximately $1 billion, in order to provide it with flexibility to support potential growth or risk-adjusted capital needs at its insurance subsidiaries, and that capital management activity -- including prospective dividend and/or share repurchase activity -- will be managed commensurate with the insurance operations' exposure and capital adequacy levels, such that overall operational and financial leverage trends remain stable or decline over the medium term.

Factors that could lead to a rating upgrade in the future include the following:

- sustained reduction in the group's financial leverage profile (e.g. below 15%);

- demonstration of reduced intrinsic volatility in the group's catastrophe-exposed homeowners and tort-liability sensitive executive liability segments, with annual catastrophe losses remaining less than 10% of shareholders' equity;

- sustained interest and dividend coverage in excess of 5x;

- sustained annual adverse reserve development less than 2.5% of total reserves.

Factors that could lead to a rating downgrade in the future include the following:

- sustained adjusted financial leverage in excess of 20%;

- annual catastrophe losses exceeding 15% of shareholders' equity;

- interest and fixed charge coverage below 5x;

- annual adverse reserve development in excess of 5% of total reserves.

The following ratings have been affirmed with a stable outlook:

The Chubb Corporation - senior long-term debt at A2, senior unsecured shelf registration at (P)A2, subordinated shelf registration at (P)A3; preferred stock shelf registration at (P)Baa1;

Chubb Capital Corporation - senior unsecured shelf registration at (P)A2, subordinated long-term debt shelf registration at (P)A3;

Chubb Executive Risk, Inc. - guaranteed senior unsecured long-term debt at A2;

Executive Risk Capital Trust - guaranteed capital securities at A3;

Chubb Capital Trusts I, II, III -- guaranteed trust preferred securities shelf registrations at (P)A3.

Federal Insurance Company - insurance financial strength rating at Aa2;

Great Northern Insurance Company - insurance financial strength rating at Aa2;

Pacific Indemnity Company - insurance financial strength rating at Aa2;

Vigilant Insurance Company - insurance financial strength rating at Aa2;

Northwestern Pacific Indemnity Company - insurance financial strength rating at Aa2;

Chubb Insurance Company of New Jersey - insurance financial strength rating at Aa2;

Chubb Lloyds Insurance Company of Texas - insurance financial strength rating at Aa2;

Chubb Custom Insurance Company - insurance financial strength rating at Aa2;

Chubb Indemnity Insurance Company - insurance financial strength rating at Aa2;

Chubb National Insurance Company - insurance financial strength rating at Aa2;

Texas Pacific Indemnity Company - insurance financial strength rating at Aa2;

Executive Risk Indemnity, Inc. - insurance financial strength rating at Aa2;

Executive Risk Specialty Insurance Company - insurance financial strength rating at Aa2;

Quadrant Indemnity Company - insurance financial strength rating at Aa2;

Chubb Atlantic Indemnity, Ltd. - insurance financial strength rating at Aa2.

The outlooks for Chubb Capital Corporation's Prime-1 rating for commercial paper, and for the insurance financial strength ratings of Chubb Argentina de Seguros and Chubb de Mexico Compania de Seguros, CV de SA remain stable.

The Chubb Corporation (NYSE: CB), based in Warren, New Jersey, is engaged through its subsidiaries in property and casualty insurance in the USA and internationally. Chubb is a market leader in personal lines insurance among high net worth individuals, and in executive protection lines of business such as directors' and officers' liability and errors and omissions coverages. For the nine months ended September 30, 2005, The Chubb Corporation reported net premiums written of $9.2 billion and consolidated net income of $1.2 billion. As of September 30, 2005, shareholders' equity was $11.3 billion.

Moody's insurance financial strength ratings are opinions of the ability of insurance companies to repay punctually senior policyholder claims and obligations. For more information, visit our website at www.moodys.com/insurance

New York
Alan Murray
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Robert Riegel
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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