Chubb’s Mexican Unit Gets Moody’s Ratings, Outlook Stable

U.S. property and casualty insurer, Chubb Corp.’s (CB) Mexican subsidiary has received a rating action from Moody’s Investors Service.

The rating agency affirmed the global local currency insurance financial strength at Baa1 and, global foreign currency insurance financial strength (“IFS”) ratings of Chubb de Mexico Compañía de Seguros S.A at Aa1.

The rating agency acknowledges, Chubb de Chile’s strong capital position, reflected by its high quality investment portfolio, a well-diversified product profile and its relatively good profitability.

Moreover, the unit enjoys numerous direct and indirect advantages courtesy of being a subsidiary of Chubb which is a niche property and casualty player in the U.S.

Nonetheless, the rating agency is bothered by the units’ modest operating scale in the Mexican insurance market indicated by just 0.3% share on a gross premium basis in 2013. The unit also has a restricted market presence in the region and is exposed to catastrophic risks and the not-so-favorable insurance market in Mexico.

The ratings carry a stable outlook implying that there is no scope for rating revision in either direction (up/down) in the near term

Last week, Moody’s affirmed the global local currency (“GLC”), global foreign currency (“GFC”) and IFS ratings of Chubb de Chile at Baa1, on the back of its strong capital position, high quality investment, a well-diversified underwriting portfolio and a condusive operating environment.

Also, last month, Moody’s reiterated the “A2” senior debt and Prime-1 commercial paper ratings of Chubb acknowledging its superior and trusted brand name in its niche market, high-end personal lines, management liability and specialty commercial lines and strong balance sheet.

Rating affirmations or upgrades from credit rating agencies play an important part in retaining investor confidence in the stock as well as maintaining credit worthiness in the market. Rating downgrades, therefore, affect the business, apart from increasing the cost of future debt issuances. We believe that strong ratings will help Chubb to retain investor confidence and help it to write more businesses going forward, thereby boosting results.

Chubb currently carries a Zacks Rank # 3 (Hold). Better-ranked insurers include AmTrust Financial Services, Inc. (AFSI), Federated National Holding Company (FNHC) and Alleghany Corp. (Y). Each of these stocks sports a Zacks Rank #1 (Strong Buy).