(CB - Free Report
) and subsidiaries’ ratings were retained by the credit rating giant, A.M. Best. The rating agency has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa+” for Chubb’s North American property/casualty arms. These units comprise members of the Chubb Bermuda Insurance Ltd., Chubb Tempest Reinsurance Ltd., ACE American Group, Chubb Group of Insurance Companies, Chubb Atlantic Indemnity Ltd. as well as Chubb Tempest Reinsurance Ltd.’s parent company — Chubb Tempest Life Reinsurance Ltd.
At the same time, the rating agency has reiterated the FSR of A++ (Superior) and the Long-Term ICR of “aa+” of Chubb European Group Limited.
Additionally, the rating agency has affirmed the FSR of A+ (Superior) and the Long-Term ICRs of “aa-” for Combined Insurance Company of America and Combined Life Insurance Company of New York, collectively known as the Combined companies. This apart, A.M. Best has upgraded the Long-Term ICR from “a” to “a+” and also reiterated the FSR of A (Excellent) for Chubb Seguros Panama S.A. Furthermore, ACE Life Insurance Company’s FSR of A- (Excellent) and its Long-Term ICR of “a-” were also affirmed by the credit rating giant.
Finally, the rating agency has affirmed the ultimate parent company, Chubb’s Long-Term ICR of “a+” as well as the Long-Term Issue Credit Ratings (Long-Term IR) and the same of Chubb INA Holdings Inc. The outlook for these aforementioned credit ratings remained stable.
Notably, following this news release, shares of Chubb had inched up 0.3% in the last trading session.
Ratings Representation of the North American Property/Casualty Subsidiaries
The ratings of the core North American property/casualty units represent each subsidiary’s solid risk-adjusted capitalization, outstanding underwriting and overall operational performances, along with continued competitive advantages within its broad standard and specialty commercial plus high net worth personal insurance businesses. The ratings also acknowledge the units’ all-inclusive and rooted enterprise risk management, strict underwriting standards, solid franchise recognition and accessibility to additional capital mechanisms offered by the property and casualty insurer, Chubb.
However, intense competition within the market, exposure to catastrophe losses and a modest level of historical adverse loss reserve development, related to asbestos and environmental (A&E) liabilities, can partially offset the abovementioned positive rating factors.
The rating agency anticipates the catastrophe losses — following Hurricanes Harvey, Irma and Maria, along with the recent earthquakes in Mexico — to remain within Chubb’s risk tolerance limits. Notably, the rating agency will continue to supervise the developments connected to such events and their apparent impact on the insurer itself.
Details Behind the Ratings of Some Other Subsidiaries
The ratings of another unit, Chubb Tempest Life Reinsurance Ltd., represent its ownership of Chubb Tempest Reinsurance Ltd., forming the majority of the company’s financial profile along with the benefit of being part of the Chubb organization.
However, the abovementioned arm’s limited stand-alone business profile, its modest scale in comparison to subsidiaries and affiliates as well as the increased risk profile of variable annuity reinsurance business, might partially offset the positive rating factors.
On the other hand, the ratings of ACE Life Insurance Company reflect benefits received by the unit for being part of the parent Chubb organization, together with the sufficient risk-adjusted capital position, which supports the unit’s risk profile.
However, its narrow business profile and statutory losses that resulted in decreasing its absolute capital position in the past few years, have a possibility to offset the aforementioned positive rating factors.
Additionally, the Combined companies’ ratings represent the perks they receive for belonging to the Chubb organization and their continued revenue growth trajectory, to name a few.
However, their current volatile earnings performance, an instable capital reserve and an elevated credit risk of the investment portfolio, are likely to offset the positive rating factors.
Interestingly, the upgrade made to Chubb Seguros Panama S.A.’s Long-Term ICR takes into account its consistent solid risk-adjusted capitalization, extended business profile as well as the company’s association with the parent entity, to name a few. However, the unit’s recent thriving market share within its insurance industry and the stiff competition within its insurance sector, can lead to a rating downgrade in the future.
Lastly, the ratings of Chubb European Group Limited consider its brilliant stand-alone risk-adjusted capitalization, sustained operational performance and an outstanding business profile as commendable positives. This apart, the unit’s ratings derive benefits obtained from Chubb, the ultimate parent company.
Rating affirmations or upgrades from credit rating agencies play an instrumental role in retaining investor confidence plus maintaining a stock’s credit worthiness. On the other hand, rating downgrades not only damage business but also increase the cost of future debt issuances. We believe such ratings to help Chubb retain investors’ trust as well as write more businesses going forward.
Zacks Rank and Share Price Movement
Currently, Chubb carries a Zacks Rank #4 (Sell). Shares of the company have gained 10.6% year to date, underperforming the industry
’s increase of 12.6%. However, we expect sustained operational performance and a robust capital position to enable the stock to rebound in the near term.
Stocks to Consider
FBL Financial sells individual life insurance and annuity products. The company delivered positive surprises in three of the last four quarters with an average beat of 6.23%.
Cigna Corporation offers insurance and health-related products and services in the United States and internationally. The company delivered positive surprises in all the last four quarters with an average beat of 9.98%.
Cincinnati Financial deals in property casualty insurance business in the United States. The company delivered positive surprises in all the last four quarters with an average beat of 14.97%.
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