Fitch Ratings has affirmed the ratings of property and
The Chubb Corporation
) with a stable outlook. The agency reiterated the "AA-" issuer
default rating and "A+" senior debt ratings of the company.
Concurrently, Fitch reiterated the insurer financial strength
of "AA" of Chubb's property/casualty insurance subsidiaries which
fall within the umbrella of Federal Insurance 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
The rating agency acknowledges Chubb's superior operating
profitability. During the first half of 2013, the company
benefitted from improved accident year underwriting results, more
favorable reserve development, partially offset by lower
investment income. This led to an increase in operating income to
$1.4 billion, up 21% year over year.
Combined ratio, which measures profitability of an insurance
company, also signals underwriting profitability for Chubb. For
the first half of 2013 the company reported a GAAP underwriting
combined ratio of 86.7%, and excluding the catastrophes the
combined ratio would have been 82.4%. The company also managed to
post a decent return on equity, averaging 15.8% during the same
Fitch also took into account the capital level and was
comfortable with Chubb's debt ratio of 18.5% as of Jun 30, 2013,
down 170 basis points from year end 2012 levels. The possibility
of the company defaulting on its creditors is very low with the
company's sufficient interest coverage ratio of 13.8x for first
half of 2013.
In terms of capital flexibility, the company is favorably
poised with a cash balance of approximately $2.0 billion at Jun
30, 2013 along with significant amount of dividend expected, of
approximately $930 million from subsidiaries.
Fitch's stable outlook reflects that Chubb is experiencing
stable financial and market trends, and that therefore a rating
change in the near term is unlikely.
Going forward, sustained solid operating performance, strong
risk-adjusted capitalization and reduced catastrophe exposure
might translate into ratings upgrades for Chubb. On the contrary,
if revenue, profitability and capital levels are hurt, Chubb
might face rating downgrades.
Rating affirmations or upgrades from credit rating agencies
play an important part in retaining investor confidence on the
stock as well as maintaining credit worthiness in the market.
Rating downgrades, therefore, adversely affect the business,
apart from increasing the costs of future debt issuances. We
believe that strong ratings will help Chubb retain investor
confidence and help it write more businesses going forward,
thereby boosting results.
The stock currently retains a Zacks Rank #2 (Buy). Other
The Travelers Companies Inc.
W.R. Berkley Corp.
) also carry investment grade ratings from Fitch.
ASSURANT INC (AIZ): Free Stock Analysis
CHUBB CORP (CB): Free Stock Analysis Report
TRAVELERS COS (TRV): Free Stock Analysis
BERKLEY (WR) CP (WRB): Free Stock Analysis
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