S&P’s Lowers Chubb Corp. Ratings, Off Watch; Outlook Negative

November 7, 2002

Standard & Poor’s has lowered its counterparty credit and senior debt ratings on Chubb Corp. to single-‘A’-plus from double-‘A’-minus. In addition, the financial strength ratings on Chubb’s operating insurance companies have been affirmed at double-‘A’-plus.

Standard & Poor’s also said the ratings have been removed from CreditWatch where they had been placed on Oct. 30 with negative implications. The outlook is negative.

“The rating actions on Chubb Corp. reflect that its financial flexibility,
though very strong, will be marginally reduced prospectively,” Standard & Poor’s credit analyst Michael Gross said. “It is expected that Chubb will undertake a plan resulting in bolstered capital strength for Federal Insurance Co., though it will decrease fixed-charge coverage for Chubb Corp., and result in fewer liquid marketable securities being held on the parent’s balance sheet,” Gross added.

The very strong double-‘A’-plus financial strength ratings on Chubb’s
Federal Insurance Co. and intercompany pool members are based on the group’s leadership position in a range of specialty insurance lines in both commercial and personal segments of the property/casualty industry. In addition, the group enjoys very strong brand-name recognition. Also reflected in the ratings are the group’s secure capitalization on a consolidated basis, including credit for cash and other liquid assets on the parent company’s balance sheet.
Finally, Chubb’s consolidated earnings profile is viewed as very strong.

Despite overall healthy operating performance including improved pricing trends and healthy growth in net premium written, Standard & Poor’s maintains a negative outlook. The outlook reflects concerns about possible prospective capital strain due to a high growth rate, current loss experience in select personal and specialty lines, and the state of strategic flux caused by pending senior executive changes. The current ratings do not anticipate further material reserve strengthening increases similar to that reported by Chubb in third-quarter 2002.

Standard & Poor’s expects total growth in net premium written to be more than 30 percent in 2002, and expects a consolidated combined ratio of less than 100 percent for 2002, excluding catastrophic events. The operating companies’ consolidated capital adequacy is expected to be adequate or below average for the current rating level at year-end 2002, while financial leverage is expected to remain
consistent for the ratings level.

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