S&P Affirms Chubb’s ‘A’ & ‘AA’ Ratings

April 8, 2004

Standard & Poor’s Ratings Services announced that it has affirmed its ‘A’ counterparty credit and senior debt ratings on Warren, N.J.-based Chubb Corp. as well as its ‘AA’ counterparty credit and insurer financial strength ratings on Chubb’s operating insurance companies. All rated entities have been assigned a stable outlook.

“The affirmation reflects Chubb’s continued very strong competitive positioning in a range of commercial and personal segments of the property/casualty industry,” said S&P. “In addition, the group enjoys very strong brand-name recognition globally and strong capitalization on a consolidated basis. Although the company experienced above-average reserve strengthening and one-time charges in recent years, new executive leadership, in place since early 2003, has succeeded in enhancing operating company capital strength, improving risk identification and management, renewing operating focus, and increasing financial flexibility on the parent (Chubb) balance sheet. “

S&P said it “expects Chubb to maintain consolidated financial leverage of 15%-20% and about $1 billion in cash and marketable securities for financial flexibility on the parent balance sheet through 2004. The capital position of the Federal Insurance intercompany pool is expected to further improve in 2004 through earnings retention. Standard & Poor’s expects Chubb to generate an underwriting profit in 2004 due to a hardened rate environment, improved loss trend, and reduced operating expenses. Standard & Poor’s views Chubb’s reserve strengthening needs and one-time charges in the past three years as above average for the current rating and unlikely to continue at a material level without having a negative effect on the current outlook and/or rating.”

S&P gave the following “Major Rating Factors:

— Very strong business position. Chubb continues to distinguish itself from the competition through innovative bundled and unbundled niche product development, exceptional global service capability, and the respected Chubb brand name reinforced by strong underwriting discipline.

— Strong capitalization. Despite increased reserve strengthening exceeding $400 million for asbestos liability and specialty commercial business in 2003, Chubb’s Federal Insurance Intercompany Pool improved its consolidated Standard & Poor’s capital adequacy ratio to about 150 percent (preliminary) at year-end 2003 compared with 136 percent in 2002. The increase is attributable to growth in unrealized capital gains as well as a capital contribution to Federal Insurance Co. from Chubb in June 2003. Chubb raised $1.3 billion in common equity and capital securities in June 2003, of which $800 million in proceeds was contributed to Federal Insurance Co.

— Strong financial flexibility. Chubb’s consolidated financial leverage was a somewhat conservative 17 percent on a debt-plus-preferred-to-capital basis at year-end 2003. Chubb Corp., the parent, maintains good access to reinsurance and proven access to the capital markets. Chubb’s financial flexibility is greatly enhanced by $1 billion in short-term marketable investments on the parent balance sheet. Standard & Poor’s views the maintenance of these investment holdings as important to counter current business risks inherent inside and outside of the Federal Insurance intercompany pool including nonconstruction surety exposure, catastrophe risk, and the credit derivative business in run-off at affiliate Chubb Financial Solutions.

— Strong profitability. Chubb maintains a diversified portfolio of personal, general commercial, and specialty property/casualty lines of business. Excluding the group’s $250 million asbestos reserve strengthening in 2003, the company’s combined ratio was a healthy 95.5 percent including catastrophe losses. Very strong profitability in the group’s standard commercial lines (excluding asbestos) and personal valuable articles segment was partially offset by adverse loss trend in the group’s specialty commercial segment, and a heavy catastrophe year resulting in lackluster results in the homeowners’ business.”

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