US insurer praised for “strong underwriting margins”
Moody’s has affirmed the Chubb Corporation’s ratings.
The rating agency has said that its decision to affirm Chubb’s US operating subsidiaries’ rating of “Aa2 insurance financial strength with a stable outlook” reflects its position as a leading underwriter, particularly for high-end homeowners’ insurance and professional liability insurance. Moody’s also affirmed the Aa2 rating of Chubb’s $4bn worth of senior unsecured debt.
Moody’s lead analyst for Chubb Alan Murray said: “Chubb’s franchise strength is corroborated by its strong underwriting margins.”
Since 2006, Chubb’s annual combined ratios have averaged in the low-to mid 80% range (including natural catastrophes), reflecting what Moody’s described as adept risk selection and product customization for those willing to pay for superior service.
Overall, Moody’s believes that Chubb’s operating subsidiaries remain strongly capitalized on a risk-adjusted basis, given its strong underwriting profitability and internal capital generation, and notwithstanding substantial share repurchases in recent years.
Invested assets are high-quality and conservative, with alternative investments representing just approximately 5% of invested assets. The analysis also pointed to Chubb’s track record of maintaining a substantial margin for potential adverse development in its core reserves, which was tempered by further rate declines for commercial insurance in line with the cyclical dynamics of the property/casualty industry.
Without $746 million in 2010 worth of reserve releases pre-tax from prior years’ loss provisions, it says that Chubb’s operating returns would have been more modest, reflecting higher recent accident year loss ratios.
But Moody’s preliminary review of Chubb’s reserves at year-end 2010 suggests that the insurer still has an ample reserve margin relative to prior years and to industry peers.
Other aspects which temper Chubb’s credit profile include significant catastrophe risk and lingering exposure to asbestos liabilities.
