Best s Rating Report

Transcription

1 CHUBB EUROPEAN GROUP LIMITED London EC3A 3BP, United Kingdom A++ Operating Company Non-Life Ultimate Parent: Chubb Limited CHUBB EUROPEAN GROUP LIMITED The Chubb Building, 100 Leadenhall Street, London EC3A 3BP, United Kingdom Web: Tel.: Fax: AMB#: AIIN#: AA Ultimate Parent#: BEST S CREDIT RATING Best s Financial Strength Rating: A++ Outlook: Stable Best s Financial Size Category: XIV RATING RATIONALE Rating Rationale: The ratings of Chubb European Group Limited (CEGL) (previously named ACE European Group Limited [AEGL]) reflect the company s excellent stand-alone risk-adjusted capitalisation, strong operating performance and excellent business profile. The ratings also reflect the implicit support provided to CEGL by its parent company, Chubb Limited (Chubb) (Zurich) [NYSE: CB], and CEGL s importance within the Chubb Group, which benefits from a diversified global operation and a consistently favourable record of generating strong earnings and cash flows. CEGL continues to be of strategic significance to its parent company as its main underwriting operation in the United Kingdom and Europe. In addition, the company receives significant reinsurance support from Chubb Group affiliates. In January 2016, the company s ultimate parent (previously named ACE Limited) completed its acquisition of The Chubb Corporation and subsequently rebranded itself under the Chubb name. In May 2017, AEGL merged with Chubb Insurance Company of Europe Limited (CICE) and Chubb Bermuda International Insurance Ireland DAC (CBII) and subsequently changed its name to CEGL. Printed December 6, Page 1 of 7

2 CEGL s excellent stand-alone risk-adjusted capitalisation reflects the company s strong operating performance in recent years, which has been achieved in spite of dividend payments. In 2016, the company reported an improvement in profit before tax and equalisation reserve movement to GBP 88.1 million (2015: GBP 63.2 million), reflecting improved operating performance further supported by higher investment results. Underwriting results continued to be supported by a substantial prior year reserve release, offsetting higher net catastrophe losses of GBP 6.8 million in 2016 (2015: GBP 4.4 million). With market conditions continuing to be generally difficult throughout 2016, CEGL reported a 1% increase in its gross written premiums, on a standard FX basis, to GBP 2.4 billion, although including the FX impact, reported premiums increased by 9% from GBP 2.2 billion in An increase in specialty personal lines and inwards reinsurance business was offset by lower premium income from the property and casualty and accident and health businesses. In 2017, CEGL s technical profitability, assuming a normal level of catastrophes, is expected to remain good, although below that achieved in 2016 reflecting CICE s weaker historical underwriting profitability and the negative impact of changed legislation on Ogden rates. Top-line revenues are expected to increase by nearly 50%, benefiting from the merger of CICE and CBII into CEGL and increased rates in the UK linked to the changed legislation on Ogden rates. CEGL has an excellent business profile in its core UK and continental European markets as an underwriter of a well-diversified portfolio of property and casualty, accident and health and specialty personal lines insurance. Positive or negative rating actions may arise from a change in the key rating fundamentals of the company s ultimate parent, Chubb Limited. Negative rating actions may arise if the actual or perceived level of strategic importance of the company to Chubb Limited is reduced. Although currently not anticipated, negative rating action may arise from a prolonged decrease in CEGL s risk-adjusted capitalisation to a level no longer appropriate for the ratings. FIVE YEAR RATING HISTORY Date Best s FSR Date Best s FSR 10/05/17 A++ 04/30/15 A++ 06/22/16 A++ 05/02/14 A++ 07/02/15 A++u 06/14/13 A+ BUSINESS PROFILE Chubb European Group Limited has a strong business profile in the London, UK and continental European markets as a specialist underwriter of commercial property and casualty, accident and health and specialty personal lines business. The company, together with Lloyd s Syndicate 2488, which is managed by Chubb Underwriting Agencies Ltd and operates in conjunction with CEGL, continues to be strategically important to the ultimate parent company, Chubb Limited, as its main underwriting operation in these markets. In January 2016, ACE Limited completed its acquisition of The Chubb Corporation and subsequently rebranded itself under the Chubb name. In May 2017, ACE European Group Limited merged with Chubb Insurance Company of Europe Limited (CICE) and Chubb Bermuda International Insurance Ireland DAC (CBII) and subsequently changed its name to Chubb European Group Limited. The merger is expected to give CEGL access to CICE s portfolio of specialty lines including High Net Worth business, and broker network. CEGL s well-diversified portfolio is underwritten through four well established divisions. The Chubb Europe division underwrites property and casualty (P&C), accident and health (A&H) and specialty personal lines business. Chubb Global Markets (CGM) is the company s wholesale international specialty underwriting business and Chubb Tempest Re International (CTRe) writes treaty reinsurance on a worldwide basis. The lines of business written by CGM and CTRe are also underwritten through Syndicate The Combined Insurance business comprises A&H products written across a number of European countries. CEGL s business is geographically well-diversified, with continental Europe accounting for 56% of gross premiums written in 2016 and the United Kingdom 24%. Remaining business, predominantly written as CGM and CTRe branded business, is well spread across North America, Asia Pacific, Africa, the Middle East and other territories. Chubb Europe maintains an excellent profile across a broad spread of commercial and specialty lines of business, which includes fire, casualty, marine, financial lines and technical lines business. Through an extensive branch network in the UK, Ireland and continental Europe, the division provides property and casualty insurance for a range of SME, corporate, multinational and large commercial clients, with P&C business comprising 52% of the company s portfolio in In addition, the division continues to maintain a strong position in its core markets as an underwriter of A&H and specialty personal lines business, which together accounted for 34% of the gross premiums written in 2016, with a broadly similar proportion expected to be written in Rating conditions for both the commercial portfolio and A&H business were competitive in 2016 and remain so in 2017 although economic conditions have been improving. Overall business in Europe contributed 86% of the company s gross premiums written in 2016, with CGM and CTRe contributing 10% and 4% respectively. RISK MANAGEMENT Enterprise risk management (ERM) is embedded throughout CEGL and is overseen ultimately by Chubb s ERM board. The board of CEGL has delegated responsibility for the oversight and implementation of its risk management framework to a risk committee, which is chaired by a non-executive director of CEGL and on which other non-executive directors participate. CEGL has adopted Chubb group s Enterprise Risk Management Framework (RMF) and has tailored it to the company s specific needs. The framework was re-approved by the board in The company s Chief Risk Officer (CRO) attends meetings of the board and audit committees and is a member of the executive and risk committees, leading the risk management function and having responsibility for embedding it across the company. The Printed December 6, Page 2 of 7

3 risk management framework uses Solvency II and ORSA principles to assess risk and manage capital requirements, to ensure that the capital required is in place to support CEGL s business objectives and to meet the requirements of policyholders, regulators and rating agencies. With regard to Solvency II, CEGL currently utilises the standard formula for its calculation of required capital. CEGL has a well-developed internal model and was part of the first wave of firms in the Internal Model Approval Process (IMAP), however as a result of the Chubb acquisition, the company elected to delay the process. CEGL continues to help develop the Chubb Global Capital Model (GCM). OPERATING PERFORMANCE Operating Results: CEGL has historically produced excellent operating profits, with stable investment results augmenting strong technical performance. In 2016 the company continued to report strong technical results supported by large investments gains, although these were offset by material foreign exchange losses, translating into a decline in profit before tax to GBP 88 million (before accounting for movement in equalisation reserve) compared to GBP 63 million in Underwriting Results: Benefiting from GBP depreciation, CEGL reported a 9% increase in its gross written premiums to GBP 2,390 million in 2016 (1% on constant exchange rates), as growth in specialty personal lines and CTRe business was offset by lower premium income from the P&C and A&H businesses. Overall business retention was strong, however quality new business proved difficult to secure at adequate rates, as CEGL faced pricing pressure in P&C, CGM, A&H and CTRe. Despite the increase in catastrophe experience in 2016, CEGL achieved an excellent technical result of GBP 95 million in 2016 (2016: GBP 88 million), before accounting for movement in the equalisation reserve. The combined ratio was stable at 90.5% in 2016 (2015: 90.4%), as an increase in net catastrophe losses to GBP 6.8 million in 2016 (2015: GBP 4.4 million) and a reduction in reserve releases to GBP 54.1 million (2015: GBP 90.7 million) was offset by a reduced expense ratio. Prior year reserve releases emanated primarily from CEGL s third party casualty and financial lines business. CEGL s technical profitability is expected to deteriorate marginally from 2017 onwards, driven by the introduction of the historically less profitable CICE portfolio. Investment Results: CEGL s 2016 investment portfolio remains broadly unchanged from the position at year-end 2015, split across bonds and other fixed interest securities (93%), cash and deposits (4%) and equities (1%). In 2016, CEGL reported large net unrealised gains of GBP 66 million (2015: loss of 73 million), stemming from volatility in the European fixed income markets during the year. The impact of large unrealised gains was somewhat softened by net realised losses of GBP 19 million and supported by investment income of GBP 74 million. As a result, the company s investment yield (including gains and losses) increased to 4.2% in 2016 (2015: 0.2%). BALANCE SHEET STRENGTH Capitalization: CEGL has maintained an excellent level of risk-adjusted capitalisation in 2016, supported by robust retained earnings. The company continues to be of strategic importance to the Chubb group, which maintains superior risk-adjusted capitalisation. CEGL also benefits from significant reinsurance support from Chubb group affiliates. Shareholders funds continued to increase reaching GBP 1.4 billion in At year-end 2017, the level of shareholders funds is likely to materially increase, benefiting from the merger with CICE and CBII. Loss Reserves: A prudent approach to reserving, with reserves held at a level above external actuary s best estimate, has enabled CEGL to report consistently favourable development of prior year reserves. The company made a net reserve release of GBP 54 million at year-end 2016 (year-end 2015: GBP 91 million). Reserves are reviewed regularly by CEGL and Chubb actuaries in addition to monitoring carried out by external auditors and consultants. Liquidity: CEGL maintains a good level of liquidity in its investment portfolio, with fixed interest securities, cash and short-term deposits and equities representing 99% of total investments at year-end Summarized Accounts as of December 31, 2016 Data reflected within all tables of this report has been compiled from the financial statements of this company (Source: Company Financial Statement). An independent audit of the company s affairs through December 31, 2016, was conducted by PricewaterhouseCoopers LLP. Printed December 6, Page 3 of 7

4 US $ per Local Currency Unit = 1 British Pound (GBP) STATEMENT OF INCOME GBP(000) USD(000) Net claims paid 610, ,049 Net increase/(decrease) in claims provision -23,459-28,865 Net claims incurred 586, ,184 Management expenses 303, ,896 Acquisition expenses 275, ,142 Net operating expenses 578, ,038 Total underwriting expenses 1,165,598 1,434,222 Balance on combined technical account 94, ,666 GBP(000) USD(000) Non-technical account: Net investment income 73,651 90,625 Realised capital gains/(losses) -18,832-23,172 Unrealised capital gains/(losses) 66,093 81,325 Exchange gains/(losses) -126, ,126 Technical account: Direct premiums 1,931,365 2,376,467 Reinsurance premiums assumed 456, ,811 Other income/(expense) Gross premiums written 2,387,951 2,938,278 Profit/(loss) before tax 88, ,431 Reinsurance ceded 1,069,964 1,316,548 Taxation 32,841 40,410 Net premiums written 1,317,987 1,621,730 Increase/(decrease) in gross unearned premiums 59,207 72,852 Profit/(loss) after tax 55,281 68,021 Reinsurers share unearned premiums 1,633 2,009 Dividend to shareholders 100, ,046 Net premiums earned 1,260,413 1,550,888 Increase/(decrease) in the equalisation provision -105, ,324 Total underwriting income 1,260,413 1,550,888 Exceptional income/(expense) 258, ,846 Retained profit/(loss) for the financial year 318, ,145 Net claims paid 610, ,049 Retained profit/(loss) brought forward 508, ,528 Net increase/(decrease) in claims provision -23,459-28,865 Retained profit/(loss) carried forward 827,067 1,017,673 Net claims incurred 586, ,184 Management expenses 303, ,896 MOVEMENT IN CAPITAL & SURPLUS Acquisition expenses 275, ,142 Net operating expenses 578, ,038 GBP(000) USD(000) Total underwriting expenses 1,165,598 1,434,222 Capital & surplus brought forward 1,078,763 1,327,375 Balance on technical account 94, ,666 Currency exchange gains 259, ,477 Combined technical account: Profit or loss for the year 160, ,345 Direct premiums 1,931,365 2,376,467 Dividend to shareholders -100, ,046 Reinsurance premiums assumed 456, ,811 Other changes -1,325-1,630 Gross premiums written 2,387,951 2,938,278 Reinsurance ceded 1,069,964 1,316,548 Total change in capital & surplus 318, ,145 Net premiums written 1,317,987 1,621,730 Capital & surplus carried forward 1,397,461 1,719,520 Increase/(decrease) in gross unearned premiums 59,207 72,852 Increase/(decrease) in reinsurers share unearned premiums 1,633 2,009 Net premiums earned 1,260,413 1,550,888 Total revenue 1,260,413 1,550,888 Printed December 6, Page 4 of 7

5 ASSETS GBP(000) % of total USD(000) Cash & deposits with credit institutions 120, ,487 Bonds & other fixed interest securities 2,855, ,514,018 Shares & other variable interest instruments 42, ,971 Liquid assets 3,018, ,714,476 Unquoted investments 39, ,149 Real estate Other investments Total investments 3,058, ,763,964 Reins. sh. of tech. reserves - unearned premiums 365, ,781 Reinsurers share of technical reserves - claims 2,446, ,010,194 Total reinsurers share of technical reserves 2,811, ,459,975 Insurance/reinsurance debtors 768, ,196 Inter-company debtors 44, ,843 Other debtors 14, ,409 Total debtors 826, ,017,448 Fixed assets 3, ,999 Prepayments & accrued income 200, ,099 Other assets 50, ,693 Total assets 6,952, ,555,177 LIABILITIES GBP(000) % of total USD(000) Capital 544, ,282 Paid-up capital 544, ,282 Non-distributable reserves 25, ,565 Retained earnings 827, ,017,673 Capital & surplus 1,397, ,719,520 Gross provision for unearned premiums 929, ,144,144 Gross provision for outstanding claims 4,085, ,027,513 Total gross technical reserves 5,015, ,171,658 Short term borrowings 51, ,764 External borrowings 51, ,764 Deposits received from reinsurers 7, ,711 Insurance/reinsurance creditors 274, ,050 Other creditors 62, ,623 Total creditors 337, ,674 Accruals & deferred income 103, ,558 Other liabilities 8, ,059 Segregated funds 30, ,234 Total liabilities & surplus 6,952, ,555,177 MANAGEMENT Directors: M. Bailey (Non-Executive Director), M.K. Hammond (Executive Director), D. Jaksic (Executive Director), A.J. Kendrick (Executive Director), J. Moghrabi (Executive Director), R.P. Murray (Executive Director), J.A. Napier (Non-Executive Director), K.N. O Shiel (Non-Executive Director), J.U. Rehman (Executive Director), C.E. Riley (Non-Executive Director), D.P. Robinson (Executive Director), A.M.W. Shaw (Executive Director), T.C. Wade (Non-Executive Director), M.J. Yardley (Non-Executive Director). Printed December 6, Page 5 of 7

6 ANALYSIS OF GROSS PREMIUMS WRITTEN GBP GBP GBP GBP GBP (000) (000) (000) (000) (000) Accident & health 418, , , , ,180 Fire 725, , , , ,128 Liability 517, , , , ,540 Marine, aviation & trans 111,592 95,589 97, , ,389 Other classes 157, , , , ,578 Reinsurance 456, , , , ,234 Total non-life 2,387,951 2,200,489 2,322,743 2,391,046 2,244,049 REINSURANCE CEGL continues to benefit from significant group reinsurance support in Reinsurance protection is purchased for each individual product line and shared Chubb group programmes cover catastrophe-exposed business. The majority of reinsurance recoverables continue to be accounted for by a major affiliate which has an A.M. Best financial strength rating of A++. External reinsurers are selected by a central reinsurance security committee (RSC), which approves maximum lines for each approved reinsurer. In the absence of collateral, the RSC selects only reinsurers with a minimum A.M. Best financial strength rating of A-. GEOGRAPHICAL DISTRIBUTION OF PREMIUMS WRITTEN GBP GBP (000) (000) Gross % of total 12/31/2015 Gross Other Africa 57, ,937 Total Africa 57, ,937 Other Asia 90, ,617 Total Asia 90, ,617 Other Europe 1,334, ,202,812 United Kingdom 564, ,252 Total Europe 1,898, ,783,064 United States 67, ,668 Total North America 67, ,668 Other Latin America 50, ,973 Total Latin America 50, ,973 Other World-Wide 224, ,230 Total 2,387, ,200,489 BALANCE SHEET ITEMS GBP GBP GBP GBP GBP (000) (000) (000) (000) (000) Liquid assets 3,018,770 2,695,045 2,787,144 2,795,132 2,816,049 Total investments 3,058,989 2,714,288 2,800,477 2,803,821 2,824,483 Total assets 6,952,828 6,091,335 6,159,888 6,064,207 6,146,833 Total gross technical reserves 5,015,732 4,458,584 4,513,435 4,456,176 4,432,310 Net technical reserves 2,203,796 2,009,475 2,082,750 2,108,603 2,063,895 Total liabilities 5,555,367 4,907,470 5,059,075 5,041,865 5,111,490 Capital & surplus 1,397,461 1,183,865 1,100,813 1,022,342 1,035,343 INCOME STATEMENT ITEMS GBP GBP GBP GBP GBP (000) (000) (000) (000) (000) Gross premiums written 2,387,951 2,200,489 2,322,743 2,391,046 2,244,049 Net premiums written 1,317,987 1,152,742 1,103,678 1,093,416 1,002,223 Balance on technical account(s) 94,815 87,837 52,460 87,956 31,097 Profit/(loss) before tax 88,122 63, ,643 62, ,452 Profit/(loss) after tax 55,281 39, ,154 43, ,055 LIQUIDITY RATIOS (%) Total debtors to total assets Liquid assets to net technical reserves Liquid assets to total liabilities Total investments to total liabilities LEVERAGE RATIOS (%) Net premiums written to capital & surplus Net technical reserves to capital & surplus Gross premiums written to capital & surplus Gross technical reserves to capital & surplus Total debtors to capital & surplus Total liabilities to capital & surplus PROFITABILITY RATIOS (%) Loss ratio Operating expense ratio Combined ratio Net investment income ratio Operating ratio Return on net premiums written Return on total assets Return on capital & surplus Printed December 6, Page 6 of 7

7 Why is this Best s Rating Report important to you? The A.M. Best Company is the oldest, most experienced rating agency in the world and has been reporting on the financial condition of insurance companies since contract or any other financial obligation issued by an insurer, nor does it address the suitability of any particular policy or contract for a specific purpose or purchaser. A Best's Financial Strength Rating (FSR) is an independent opinion of an insurer's financial strength and ability to meet its ongoing insurance policy and contract obligations. An FSR is not assigned to specific insurance policies or contracts and does not address any other risk, including, but not limited to, an insurer's claims-payment policies or procedures; the ability of the insurer to dispute or deny claims payment on grounds of misrepresentation or fraud; or any specific liability contractually borne by the policy or contract holder. An FSR is not a recommendation to purchase, hold or terminate any insurance policy, The company information appearing in this pamphlet is an extract from the complete AMB Credit Report. You may obtain the complete report by contacting Customer Service at +1(908) or customer_service@ambest.com. Please reference the company's identification number (AMB#) listed on this rating report. For the latest Best's Financial Strength Ratings along with their definitions and A.M. Best's Terms of Use, please visit Copyright 2017 A.M. Best Company, Inc. and/or its affiliates. All rights reserved. No part of this report may be reproduced, distributed, or stored in a database or retrieval system, or transmitted in any form or by any means without the prior written permission of the A.M. Best Company. While the data in this report was obtained from sources believed to be reliable, its accuracy is not guaranteed. Printed December 6, Page 7 of 7