Chubb Removed from CreditWatch

November 9, 2001

Standard & Poor’s removed from CreditWatch and lowered its counterparty credit and senior debt ratings on Chubb Corp. to “AA-” from “AA+”, its preferred stock rating to “A” from “AA-“, and its financial strength ratings on Chubb’s operating insurance companies to “AA+” from “AAA.”

At the same time, S&P assigned its preliminary “AA-” senior debt, “A+” subordinated debt, and “A” preferred stock ratings to Chubb Corp.’s outstanding $600 million shelf registration. The outlook is stable.

The ratings were placed on CreditWatch on Sept 20, 2001, because of uncertainty regarding Chubb’s loss exposure stemming from the Sept. 11, terrorist attacks on the U.S. The current rating actions, however, are related in part to issues reflected in S&P’s negative outlook on Chubb prior to Sept. 20. Regarding World Trade Center (WTC)-related losses, S&P believes that Chubb continues to maintain an extremely strong balance sheet and is well positioned to absorb losses exceeding $600 million (pre-tax) related to the Sept. 11 events as disclosed by the company.

The rating actions reflect S&P’s opinion that the strength of Chubb Insurance Group’s (Chubb) consolidated business position and operating performance are increasingly reflecting characteristics more in line with very strong financial strength rather than the extremely strong characteristics expected of a “AAA” insurer. Although Chubb maintains a diverse portfolio of property/casualty (P/C) and reinsurance businesses, Chubb’s business lines are not expected to maintain on a long-term basis the prior historical underwriting profit margins that helped sustain the “AAA” rating. Although recent market pricing is improving, Chubb is expected to face increasing competitive pressure long-term, causing the company to be increasingly challenged to charge a premium price for its brand and service for many of its products.

The two-notch downgrade of the parent’s counterparty and senior debt ratings reflects the movement toward more standard rating notching, as the operating companies are now viewed in the “AA” rating category. The strength of the company’s consolidated balance sheet still warrants a nonstandard two-notch gap between holding company and operating company, instead of the standard three notches.

The very strong insurer financial strength ratings on Chubb are based on its leadership position in a range of specialty insurance lines in both commercial and personal segments of the P/C industry. In addition, the group enjoys very strong brand-name recognition.

Also reflected in the ratings are the group’s more than ample financial flexibility and extremely strong capitalization on a consolidated basis, including partial credit for funds at the holding company. Finally, Chubb has maintained a very strong earnings profile in difficult market conditions.

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