December 18, 2017

Chubb Reports Second Quarter Net Income per Share of $2.03

Warren, NJ – The Chubb Corporation [NYSE: CB] recently reported that net income in the second quarter of 2014 was $499 million compared to $579 million in the second quarter of 2013. Net income per share declined 8% to $2.03 from $2.21.

Operating income, which the company defines as net income excluding after-tax realized investment gains and losses, was $418 million in the second quarter of 2014 compared to $463 million in the second quarter of 2013. Operating income per share declined 4% to $1.70 from $1.77.

Average diluted shares outstanding for the second quarter were 246.2 million in 2014 and 261.5 million in 2013.

The impact of catastrophes in the second quarter was $146 million before tax ($0.39 per share after tax) in 2014 compared to $237 million before tax ($0.59 per share after tax) in 2013.

The second quarter combined loss and expense ratio was 90.0% in 2014 compared to 88.8% in 2013. The impact of catastrophes accounted for 4.8 percentage points of the combined ratio in the second quarter of 2014 compared to 7.9 points in the second quarter of 2013. Excluding the impact of catastrophes, the second quarter combined ratio was 85.2% in 2014 and 80.9% in 2013.

The expense ratio for the second quarter of 2014 was 31.3% compared to 32.1% in the corresponding year-earlier quarter.

Net written premiums for the second quarter of 2014 increased 4% to $3.2 billion. Excluding the effect of currency fluctuation, premiums grew 5%. Premiums were up 5% in the U.S. and up 1% outside the U.S. (up 5% in local currencies).

Property and casualty investment income after taxes for the second quarter declined 4% to $275 million in 2014 from $286 million in 2013.

Net income for the second quarter of 2014 reflected net realized investment gains of $125 million before tax ($0.33 per share after-tax), compared to $179 million before tax ($0.44 per share after-tax) in the second quarter of 2013.

During the second quarter of 2014, Chubb repurchased approximately 4.0 million shares of its common stock at a total cost of $375 million (an average of $92.95 per share). As of June 30, 2014, there remained approximately $823 million available for share repurchases under the current authorization.

“Chubb produced solid results in the second quarter of 2014, with operating income of $1.70 per share and net income of $2.03,” said John D. Finnegan, Chairman, President and Chief Executive Officer. “Our results benefited from strong premium growth and retention as well as excellent performance in our long-tail lines of business such as Professional Liability, Casualty and Workers’ Compensation. However, our results this quarter were adversely impacted by catastrophe and non-catastrophe losses related to severe weather in the United States as well as an unusually high level of Homeowners’ and Commercial fire losses.

“We remain encouraged by the mid-single-digit increases in our U.S. rate change metrics that we achieved in all of our businesses during the second quarter, while also attaining our highest overall level of retention in three years,” said Mr. Finnegan.

Six-Month Results
For the first six months of 2014, net income was $948 million compared to $1.2 billion in the first half of 2013. Net income per share for the first half declined 18% to $3.83 from $4.69.

Operating income for the first six months of 2014 was $792 million compared to $1.0 billion in the first half of 2013. Operating income per share for the first half of 2014 declined 18% to $3.20 from $3.91.

Average diluted shares outstanding for the first six months were 247.7 million in 2014 and 263.2 million in 2013.

The impact of catastrophes in the first six months of 2014 was $345 million before tax ($0.91 per share after-tax), compared to $255 million before tax ($0.63 per share after-tax) in the first half of 2013.

The combined ratio for the first six months was 91.6% in 2014 compared to 86.7% in 2013. The impact of catastrophes in the first half accounted for 5.7 percentage points of the combined ratio in 2014 and 4.3 points in 2013. Excluding the impact of catastrophes, the combined ratio for the first half was 85.9% in 2014 and 82.4% in 2013.

The expense ratio for the first six months was 31.7% in 2014 and 32.2% in 2013.

Net written premiums for the first six months of 2014 increased 2% to $6.3 billion. Excluding the effect of currency fluctuation, premiums grew 3%. Premiums were up 4% in the U.S. and down 3% outside the U.S. (flat in local currencies).

Property and casualty investment income after taxes for the first six months declined 4% to $552 million in 2014 from $574 million in 2013.

Net income for the first six months of 2014 reflected net realized investment gains of $241 million before tax ($0.63 per share after-tax). Net income for the first half of 2013 reflected net realized investment gains of $317 million before tax ($0.78 per share after-tax).

During the first six months of 2014, Chubb repurchased approximately 8.8 million shares of common stock at a total cost of $784 million (an average of $89.59 per share).

Outlook for 2014
Chubb also announced a revision of full year 2014 operating income per share guidance to a range of $6.75 to $6.95 from the $7.10 to $7.40 range provided in its January 2014 guidance. The revised guidance reflects the company’s actual results in the first six months and its outlook for the second half of the year.
The revised guidance assumes for the 2014 full year:

  • A 2% to 4% increase in net written premiums.
  • Catastrophe losses of 5.3 percentage points of the combined ratio. The impact of each percentage point of catastrophe losses on 2014 full year operating income per share is approximately $0.33.
  • A combined ratio of between 90% and 91%.
  • A decline of 4% to 6% in property and casualty investment income after taxes.
  • Approximately 244 million average diluted shares outstanding.

Guidance and related assumptions are subject to the risks outlined in the company’s forward-looking information safe-harbor statements (see below).

Second Quarter Operations Review
Chubb Personal Insurance (CPI) net written premiums increased 5% in the second quarter of 2014 to $1.2 billion. CPI’s combined ratio for the quarter was 92.7% compared to 89.6% in the second quarter of 2013. The impact of catastrophe losses in the second quarter accounted for 7.5 percentage points of the combined ratio in 2014 and 12.7 points in 2013. Excluding the impact of catastrophe losses, CPI’s second quarter combined ratio was 85.2% in 2014 and 76.9% in 2013.

Net written premiums for Homeowners increased 4%, and the combined ratio was 92.2%. Personal Automobile net written premiums were flat, and the combined ratio was 95.6%. Other Personal lines premiums increased 10%, and the combined ratio was 93.1%.

Chubb Commercial Insurance (CCI) net written premiums increased 3% in the second quarter of 2014 to $1.4 billion. The combined ratio for the second quarter was 93.3% in 2014 and 89.9% in 2013. The impact of catastrophe losses in the second quarter accounted for 4.9 percentage points of the combined ratio in 2014 and 8.1 points in 2013. Excluding the impact of catastrophe losses, CCI’s second quarter combined ratio was 88.4% in 2014 and 81.8% in 2013.

In the U.S., average second quarter CCI renewal rates were up 4%, renewal premium retention was 87% and the ratio of new to lost business was 1.2 to 1.

Chubb Specialty Insurance (CSI) net written premiums increased 5% in the second quarter of 2014 to $655 million. The second quarter combined ratio improved to 78.7% in 2014 from 86.0% in 2013.

Professional Liability (PL) net written premiums were up 4%, and the business had a combined ratio of 83.2%. In the U.S., average second quarter PL renewal rates were up 6%, renewal premium retention was 88% and the ratio of new to lost business was 1.2 to 1.

Surety net written premiums were up 8%, and the combined ratio was 45.3%.

The complete earnings release is available here: Chubb Second Quarter 2014 Results

Source: Chubb

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