Chubb Affirmed; Outlook Stable
S&P Ratings Services affirmed its "A" counter-party credit and senior debt ratings on Warren, N.J.-based Chubb Corp. In addition, S&P affirmed its "AA" counter-party credit and insurer financial strength ratings on Chubb's operating companies. The outlook is stable.
Reportedly, the affirmation reflects Chubb's continued very strong competitive positioning in a range of commercial and personal segments. In addition, the group enjoys very strong brand-name recognition globally and strong capitalization on a consolidated basis. Although the company experienced above-average reserve strengthening and one-time charges in recent years, new executive leadership—in place since early 2003—has succeeded in enhancing operating company capital strength, improving risk identification and management, renewing operating focus, and increasing financial flexibility.
S&P expects Chubb to maintain consolidated financial leverage of 15 percent to 20 percent and about $1 billion in cash and marketable securities for financial flexibility on the parent balance sheet through 2004. The capital position of the Federal Insurance Inter-company Pool is expected to further improve in 2004 through earnings retention. S&P expects Chubb to generate an underwriting profit in 2004 due to a hardened rate environment, improved loss trend, and reduced operating expenses. S&P views Chubb's reserve strengthening needs and one-time charges in the past three years as above average for the current rating and unlikely to continue at a material level without having a negative effect on the current outlook and/or rating.
Atlantic Specialty Affirmed, Withdrawn
S&P affirmed its "BBB" counterparty credit and financial strength ratings on Atlantic Specialty Insurance Co. and removed these ratings from CreditWatch. These ratings were subsequently withdrawn at the company's request.
This action follows completion of the sale of Atlantic Specialty to OneBeacon Insurance Co. as part of the previously announced agreement to sell most of Atlantic Mutual's commercial lines business to OneBeacon. This transaction closed on April 1, 2004. Before its sale, all policyholder liabilities of Atlantic Specialty were reinsured into other Atlantic Mutual companies. OneBeacon is not rated by S&P. Atlantic Mutual announced on Dec. 5, 2003, that it had reached an agreement to sell most of its remaining commercial lines business to OneBeacon, and as a result S&P had placed its "BBB" counterparty credit and financial strength ratings on Atlantic Mutual Insurance Co., Centennial Insurance Co., and Atlantic Lloyds Insurance Co. of Texas on CreditWatch with negative implications and its "BBB" counterparty credit and financial strength ratings on Atlantic Specialty on CreditWatch with developing implications. Also placed on CreditWatch negative was the "BB+" rating on Atlantic Mutual's surplus note issues. These other ratings remain on CreditWatch negative.
The sale of Atlantic Mutual's commercial lines business to OneBeacon, together with the sale of Atlantic Mutual's marine division to Travelers P/C Corp., means the company has exited lines that in 2002 constituted 85 percent of its direct premiums, leaving Atlantic Mutual a much smaller, less diversified writer of personal lines business. Both transactions involved the sale of unearned premiums and renewal rights, leaving Atlantic Mutual with the challenge of managing the runoff of claims reserves associated with the older, less-profitable business for which significant reserve strengthening has already occurred.
