Chubb’s balance sheet ‘strongest’ in its financials – AM Best

AM Best forecasts that earnings and cash flows from Chubb Limited's operating subsidiaries will continue to support risk-adjusted capitalization if the need arises. 

Chubb has reflected a solid balance sheet, along with a very capable operating performance, favourable business profile, and appropriate enterprise risk management (ERM), AM Best said.

The credit agency also confirmed the insurer’s financial strength as ‘superior’.

Chubb's very strong operating performance is evidenced by return measures that have outperformed those of the AM Best commercial casualty composite significantly over the past five years. 

Despite the impact of unusually high catastrophe losses since 2021 and pandemic-related losses in 2020, Chubb has consistently delivered strong underwriting performance, operating income, and net income.

A robust pricing environment in recent years, particularly for the majority of its commercial business lines globally, has been especially supportive of remarkably strong underwriting performance through 2023. However, sharply elevated inflationary trends affecting both property and casualty lines may limit prospective underwriting performance.

Chubb is a market leader in several principal product and customer segments, including high-net-worth personal lines, commercial and specialty insurance, such as management liability and casualty lines, excess and surplus lines, and multi peril crop/agricultural insurance. 

AM Best notes that Chubb's risk-adjusted capitalisation strength, as measured by Best's Capital Adequacy Ratio (BCAR) as of third quarter 2023, remains consistent with a strongest level capital adequacy assessment but has declined somewhat over the past 24 months.

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This decline is largely due to dividends paid to the parent company for share repurchases and the completion in July 2022 of the $5.4b acquisition of Cigna's Asia-Pacific life and accident & health (A&H) businesses, as well as additional Huatai shares acquired. 

However, AM Best anticipates that capital retention by Chubb will increase through the end of 2023 and into 2024, in part through a reduced level of share repurchases at the parent, allowing the group's risk-adjusted capitalization levels to return to historically higher levels.

Each of Chubb's component groups benefits from the financial flexibility provided by Chubb Limited, the publicly traded ultimate parent, which maintains financial leverage in line with its current ratings, as well as additional liquidity sources given its access to capital markets and lines of credit. 

AM Best forecasts that earnings and cash flows from Chubb Limited's operating subsidiaries will continue to support risk-adjusted capitalization if the need arises. 

Simultaneously, surplus growth at each group has been limited at times over the past five years due to dividends. 

AM Best expects that, following capital deployment in connection with the July 2022 acquisition of Cigna's Asia-Pacific life and A&H businesses and considering recent market volatility and stiffer headwinds in several key commercial and personal property/casualty (P/C) segments, Chubb's prospective internal capital generation will continue a favourable trend evident through the first three quarters of 2023.