Fitch Ratings has affirmed the ratings of property and casualty
The Chubb Corporation
) with a stable outlook. As a part of the yearly rating action, the
agency reiterated the "AA-" issuer default rating and "A+" senior
debt ratings of the company.
Fitch's recent rating action comes on the back of Chubb's
consistent operating profitability, maintenance of superior
risk-adjusted capital and a conservative investment portfolio.
The rating agency acknowledges Chubb's 12
position (on the basis of net premiums written in 2011) in the
property and casualty market in the U.S. It also views the
company's international operations to be a significant contributor
to overall earnings over the long term. Currently, its
international operations comprise approximately 27% of the
Combined ratio, which measures profitability of an insurance
company, also signals underwriting profitability for Chubb. Over
the past five years, Chubb's combined ratio averages 88.4% through
2011. The company also managed to post a decent return on
equity, averaging 13.9% during the same time period.
The rating agency also views favorably the performance of the
company during the recently reported first quarter earnings, which
benefited from benign cat loss compared with substantial cat loss
in the year-ago quarter.
Fitch also took into account the capital level and was
comfortable with Chubb's debt ratio of 18.8% as of March 31, 2012.
The moderation in leverage within the capital structure came on the
back of a discharge of $400 million of debt recently. The
possibility of the company defaulting on its creditors is nil with
the company's interest coverage ratio at 12.3x, considerably higher
than 8.8x in the prior-year period.
In terms of capital flexibility, the company is favorably poised
with a cash balance of approximately $2 billion along with $1.8
billion of expected dividend to be received from subsidiaries.
Earlier, in April 2012, another rating agency A.M. Best affirmed
the ICR of "aa-"and "AMB-1+" on commercial paper of Chubb, with a
stable outlook. The rating agency also acknowledged Chubb's
superior operating performance, disciplined underwriting, strong
brand name, solid capital position, diversified business profile, a
conservative investment portfolio and a strong cash generation
Going forward, sustained solid operating performance, strong
risk-adjusted capitalization and reduced catastrophe exposure might
translate into positive ratings for Chubb. On the contrary, if
revenue, profitability and capital levels are hurt, Chubb might
face rating downgrades.
Based in Warren, New Jersey, Chubb closely competes with
The Travelers Companies Inc.
W.R. Berkley Corp.
). The stock currently retains a Zacks # 3 Rank, which translates
into a short-term Hold rating. Considering the fundamentals, we are
also maintaining our long-term Neutral recommendation on the
CHUBB CORP (CB): Free Stock Analysis Report
TRAVELERS COS (TRV): Free Stock Analysis Report
BERKLEY (WR) CP (WRB): Free Stock Analysis
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