A.M. Best Assigns Debt Rating to Chubb's Forthcoming Subordinated Capital Securities.OLDWICK, N.J. -- A.M. Best Co. has assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. a debt rating of "a" to the forthcoming $1.0 billion Directly-Issued Subordinated Capital Securities (DISCS) to be issued by The Chubb Corporation (Chubb) (Warren, NJ) [NYSE NYSE See: New York Stock Exchange :CB]. The rating outlook is stable. These DISCS have a scheduled maturity of 30 years, a final maturity of 60 years, are non-callable at par for the first 10 years and are subject to a Replacement Capital Covenant (Covenant). The Covenant restricts replacement of the DISCS for the first 40 years only with securities, which carry similar "equity like" characteristics, essentially adding a permanency per·ma·nen·cy n. Permanence: tourists who were in awe of the permanency of the great pyramids of Egypt. Noun 1. to the benefits as well as restrictions afforded by the DISCS' terms. The rating reflects the intended subordination of these DISCS to all of Chubb's existing and future debt obligations, including guarantees and trust preferred securities. Chubb intends to use the net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from this offering to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. shares of its common stock, thereby immediately lowering its cost of capital. However, the interest rate on the DISCS is fixed for the first 10 years, moving to a floating rate thereafter. Should interest rates move to a level that significantly exceeds the company's equity cost of capital, the capital market and industry environment at that time may require management to re-evaluate and manage its capital structure subject to the confines con·fine v. con·fined, con·fin·ing, con·fines v.tr. 1. To keep within bounds; restrict: Please confine your remarks to the issues at hand. See Synonyms at limit. of the terms of the DISCS. In 2007, Chubb expects to fund its share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. with the proceeds of the current offering and excess capital. A.M. Best believes that share repurchases will be prudently managed and that excess capital will be generated in concert with the repurchases and the expectation that Chubb intends to maintain liquid funds at the holding company in excess of $1.0 billion. The holding company's current liquidity is significant with approximately $1.8 billion of liquid funds held at December 31, 2006. At year-end 2006, Chubb's debt-to-total capital was 15.1%, down from 16.9% at year-end 2005 and 21.7% at year-end 2004. Adjusted to reflect (1) the redemption of $125 million of capital securities on February 1, 2007 and (2) the current $1.0 billion DISCS offering, Chubb's proforma debt-to-total capital rises to 19.4%. While Chubb's debt-to-total capital is expected to temporarily rise modestly above 20% during 2007 due to the prefunding of maturing debt, given the company's anticipated continued strong--albeit somewhat lower--earnings for the year, A.M. Best expects its debt-to-total capital to be below 20% by year end. Given the strong risk-adjusted capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. of Chubb Group of Insurance Companies (Warren, NJ) and its strong earnings outlook in the near term, A.M. Best believes Chubb is well positioned to achieve its capital management plans in 2007. Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. industries, including the banking and insurance sectors. For more information, visit www.ambest.com. |
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