A.M. Best Affirms Chubb’s Financial Strength and Debt Ratings

December 9, 2003

A.M. Best Co. has affirmed the financial strength ratings of A++ (Superior) of the property/casualty subsidiaries of The Chubb Corporation (Chubb).

Concurrently, A.M. Best has affirmed the existing senior debt ratings of “aa-” of Chubb and Chubb Executive Risk Inc.; the rating of “a+” of the capital securities of Executive Risk Capital Trust and the rating of AMB-1+ on the commercial paper issued by Chubb Capital Corporation. Additionally, A.M. Best has affirmed the indicative ratings on securities that are part of the shelf registration filed by Chubb. The outlook for all the ratings is stable.

These ratings consider Chubb’s enhanced subsidiary capitalization, improved 2003 earnings and prospects for 2004. However, Chubb has exposure to discontinued credit derivatives business, potential surety bond losses, future professional liability claims relating to the mutual fund industry and challenges associated with asbestos and environmental (A&E) liabilities.

Despite these factors, Chubb and its operating subsidiaries are favorably positioned and sufficiently well-capitalized to absorb these challenges. This premise is based on A.M. Best’s conservative view of capitalization, which includes a stress test for sizable potential deficiencies in both A&E and core loss reserves, as well as losses arising from its surety and credit derivatives exposures. Chubb has a conservative operating philosophy; benefits from its long-standing producer relationships, global franchise and customer loyalty; and has sustainable competitive advantages within its specialty insurance and upscale personal lines businesses. The ratings also acknowledge Chubb’s proven financial flexibility, disciplined capital management and prudent loss reserving and pricing practices.

Chubb has conservatively managed its capital structure, holding company liquidity and financial leverage. However, leverage and holding company cash flow requirements have recently increased. Financial leverage currently approximates 25 percent, including equity units, a significant increase since 1999 and high for the current debt ratings. Nevertheless, recent capital raising increased Chubb’s liquid assets, which along with its earnings prospects in 2004, provides strong coverage of its holding company obligations.

The group has experienced a sharp increase in loss costs in its sizable professional liability book over the past several years. With the recent emergence of investigations and class action lawsuits in the mutual fund industry, Chubb will likely experience a substantial increase in associated claims, although it has recently reduced policy limits to lessen exposure.

Finally, Chubb has exposure to natural catastrophe losses as well as losses stemming from future acts of terrorism.

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