April 26, 2017 / 3:53 PM / 4 months ago

Fitch Affirms Chubb's 'AA' IFS Ratings; Outlook Stable

(The following statement was released by the rating agency) CHICAGO, April 26 (Fitch) Fitch Ratings has affirmed the 'A+' Issuer Default Rating (IDR) of Chubb Limited and the 'AA' Insurer Financial Strength (IFS) rating of its operating subsidiaries. The Rating Outlook is Stable. A complete list of rating actions follows at the end of this release. KEY RATING DRIVERS On Jan. 14, 2016 Chubb Limited was created when ACE Limited acquired the Chubb Corporation for approximately $30 billion, creating one of the largest non-life insurance companies in the world. The transaction increased size and scale for the combined entity to approximately $36 billion in global gross written premiums with slightly over one-third of business originating outside the United States. Legacy ACE demonstrated past success in executing successful acquisitions, but the size and complexity of the Chubb acquisition presented a unique integration challenge. However, the company's very strong combined 2016 operating results and increased run rate integration savings estimate of $800 million by the end of 2018 provide indications that the integration is proceeding according to plan if not slightly better. The combined company's rating strengths include a very strong balance sheet position and financial flexibility with moderate leverage and large, diverse sources of revenues and earnings. Chubb's operating performance continues to exceed peers and is characterized by favorable underwriting performance across all business segments with manageable catastrophe losses, consistent favorable loss reserve development, stable investment income and strong operating cash flow. For analytical purposes Fitch utilizes pro forma 2016 figures that treat the acquisition as if it took place on Jan. 1 instead of Jan. 14. For full year 2016 net written premiums were $29 billion, down about 3% from the prior year on a constant dollar basis. The calendar year combined ratio for full year 2016 remains favorable at 88%, relatively flat compared to 87.5% for 2015. CB reported an 87.5% combined ratio for Q1 2017 compared to 90% for Q1 2016. To fund the transaction legacy ACE raised $5.3 billion in debt and about $15 billion in equity plus cash dividends. Stated financial leverage was 22% as of Dec. 31, 2016, which is consistent with rating tolerances and will likely trend down towards 20% in the near term. Operating fixed charge coverage was 10 times (x) as of Dec. 31, 2016, which is lower than historical averages due to the higher debt load but still in line with rating expectations. The new combined entity is anticipated to have sufficient debt servicing capacity from operating subsidiary dividend capacity, earnings, and other liquidity sources. RATING SENSITIVITIES Key current rating triggers that may lead to an upgrade include: --Continued very strong operating performance with a combined ratio consistently approximating 90% could lead to an upgrade given larger operating scale and a more diverse business profile; --A material improvement in tangible capital; --Operating fixed charge coverage approximating 15x; Key rating triggers that may lead to a downgrade include: --A material deterioration in operating performance such that the combined ratio is consistently less profitable at over 95%; --A significant reduction in stockholders' equity that is not recovered in the near term or any damage to franchise value could lead to a downgrade; --Increase in financial leverage ratio to a sustained level of over 27%. Fitch has affirmed the following ratings: Chubb Limited --IDR at 'A+'. Chubb INA Holdings Inc. --IDR at 'A+'; --$300 million senior notes at 5.75% due 2018 at 'A'; --$500 million senior notes at 5.9% due 2019 at 'A'; --$1.3 billion senior notes at 2.3% due 2020 at 'A'; --$1 billion senior notes at 2.875% due 2022 at 'A'; --$475 million senior notes at 2.7% due 2023 at 'A'; --$700 million senior notes at 3.35% due 2024 at 'A'; --$800 million senior notes at due 3.15% 2025 at 'A'; --$1.5 billion senior notes at due 3.35% 2026 at 'A'; --$100 million senior debentures at 8.875% due 2029 at 'A'; --$300 million senior notes at 6.7% due 2036 at 'A'; --$475 million senior notes at 4.15% due 2043 at 'A'; --$1.5 billion senior notes at 4.35% due 2045 at 'A'; --$600 million senior notes at 5.75% due 2018 at 'A'; --$100 million senior notes at 6.6% due 2018 at 'A'; --$200 million senior notes at 6.8% due 2031 at 'A'; --$800 million senior notes at 6% due 2037 at 'A'; --$600 million senior notes at 6.5% due 2038 at 'A'; --$1 billion junior subordinated debentures at 6.375% due 2067 to 'BBB+'. ACE Capital Trust II --$300 million capital securities due 2030 at 'BBB+'. ACE American Insurance Company ACE Fire Underwriters Ins. Company ACE INA Overseas Insurance Company Ltd. ACE Insurance Company of the Midwest ACE Property and Casualty Insurance Company Agri General Insurance Company Atlantic Employers Insurance Company Bankers Standard Insurance Company Chubb Atlantic Indemnity Ltd. Chubb Bermuda Insurance Limited Chubb Custom Insurance Co. Chubb Indemnity Insurance Co. Chubb Insurance Company of Europe, S.E. Chubb Insurance Company of New Jersey Chubb Lloyds Insurance Company of Texas Chubb National Insurance Co. Chubb Reinsurance (Switzerland) Limited Chubb Tempest Reinsurance Limited Executive Risk Indemnity, Inc. Executive Risk Specialty Insurance Co. Federal Insurance Company Great Northern Insurance Co. Illinois Union Insurance Company Indemnity Insurance Company of North America Insurance Company of North America Pacific Employers Insurance Company Pacific Indemnity Co. Texas Pacific Indemnity Company Vigilant Insurance Co. Westchester Fire Insurance Company Westchester Surplus Lines Insurance Company --IFS at 'AA'. The Rating Outlook is Stable. Contact: Primary Analyst Gerald Glombicki, CPA Director +1-312-606-2354 Fitch Ratings, Inc. 70 W. Madison Street Chicago, IL 60602 Secondary Analyst James B. Auden, CFA Managing Director +1-312-368-3146 Committee Chairperson Keith M. Buckley, CFA Managing Director +1-312-368-3211 Media Relations: Hannah James, New York, Tel: + 1 646 582 4947, Email: hannah.james@fitchratings.com. 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