A.M. Best Assigns Debt Rating to Chubb's Senior Notes.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--March 17, 2003

A.M. Best Co. has assigned an "aa-" senior debt rating to The Chubb Corp.'s (NYSE:CB) (Warren, N.J.) $500 million 144a senior notes.

The debt will be issued in two tranches, including five- and 10-year notes. The proceeds from this offering will be used to enhance holding company liquidity and repay existing short-term debt.

Historically, Chubb has conservatively managed its capital structure and financial leverage. Although higher than historical levels, Chubb's financial leverage -- as measured by debt and capital securities to total capital -- will remain moderate at 26% considering the new debt, the retirement of commercial paper and the $100 million of senior notes that matured in February 2003.

Of greater significance, however, are the increased level of holding company cash requirements, potential capital constraints at the subsidiary level, as well as a number of unresolved issues. For 2003, interest expense and shareholder dividends amount to approximately $400 million. Chubb has historically maintained significant invested assets at the holding company level in excess of $1 billion.

This balance has precipitously declined over the past 18 months. The ability to accumulate capital at the subsidiary level, which is needed to support more rapid growth in the current hard property/ casualty markets, remains constrained by the dividends to be up-streamed to meet holding company obligations. However, management is committed to maintaining a strong capital base and holding company liquidity.

A.M. Best's ongoing concerns regarding future capital formation are further heightened by the challenges facing Chubb and the potential for continued earnings variability as it relates to Chubb's exposure to gas forward purchase surety contracts (similar to those issued to Mahonia Ltd.) and the possibility of future loss emergence from its sizable directors and officers and errors and omissions businesses.

Chubb Financial Solutions' credit derivatives business contributes to the potential for significant volatility in earnings and this business is under strategic review. Finally, there remains uncertainty relating to significant reinsurance recoverables potentially in dispute that are associated with World Trade Center losses.

A.M. Best plans to meet with Chubb's management in April 2003 and shortly thereafter conduct a comprehensive review and evaluation of Chubb's operations.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.