Fitch Affirms Chubb’s ‘AA’ IFS Ratings; Outlook Stable
KEY RATING DRIVERS
On
Fitch views the transaction favorably due to the increased size and scale of the combined entity which is estimated to write roughly
The combined company's rating strengths include a strong balance sheet position and financial flexibility with moderate leverage and diverse sources of revenues and earnings with the advantages of increased global size and scale and strong management teams.
Both legacy ACE and legacy Chubb's operating performance consistently exceeded peers, characterized by low combined ratios with manageable catastrophe losses, consistent favorable loss reserve development and stable investment income from strong operating cash flow. However, past performance is no indication of future success.
For analytical purposes Fitch utilizes pro forma 2016 figures that treat the acquisition as if it took place on
To fund this transaction legacy ACE raised
Operating fixed charge coverage was 9.0 times (x) as of
RATING SENSITIVITIES
Key current rating triggers that may lead to an upgrade include:
--Given increased market position size and scale, demonstration of continued strong operating performance consistent with the individual performance of legacy entities;
--A reduction in financial leverage to a run-rate level of approximately 20% or lower;
--Operating fixed charge coverage approximating 15x;
Key rating triggers that may lead to a downgrade include:
--A material deterioration in operating performance such that the combined ratio is consistently less profitable at over 95%;
--A significant reduction in stockholders' equity that is not recovered in the near term;
--Increase in financial leverage ratio to a sustained level of over 27%;
--Failure to execute acquisition integration plans as expected resulting in material economic impact on the company.
Fitch has affirmed the following ratings:
Chubb Limited
--Issuer Default Rating (IDR) at 'A+'.
--IDR at 'A+';
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ACE Fire Underwriters Ins. Company
Bankers
Federal Insurance Company
Texas
--IFS at 'AA'.
The Rating Outlook is Stable.
Fitch has withdrawn the 'AA' IFS Rating with a Stable Outlook for the following entities as they no longer exist:
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria
Insurance Rating Methodology (pub.
https://www.fitchratings.com/site/re/887191
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https://www.fitchratings.com/regulatory
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Copyright © 2016 by Fitch Ratings, Inc.,
The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from
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