Warren, NJ -(PRNewswire)- The Chubb Corporation (NYSE: CB) recently reported net income in the fourth quarter of 2012 of $102 million or $0.38 per share, compared to $452 million or $1.60 per share in the fourth quarter of 2011.
Operating income was $44 million or $0.16 per share in the fourth quarter of 2012, compared to $460 million or $1.63 per share in the corresponding quarter of 2011. The company defines operating income as net income excluding after-tax realized investment gains and losses.
Chubb’s results for the fourth quarter of 2012 were adversely affected by costs of $882 million before tax ($2.15 per share after-tax) related to Storm Sandy. This amount includes $829 million of losses net of reinsurance recoverable, as well as reinsurance reinstatement premium costs of $53 million. During the quarter, the company also had $6 million of favorable development of reserves for catastrophes that occurred before the fourth quarter of 2012, reducing the total impact of catastrophes in the fourth quarter of 2012 to $876 million before tax ($2.13 per share after-tax). In the fourth quarter of 2011, the impact of catastrophes was $11 million before tax ($0.03 per share after-tax).
Net written premiums for the fourth quarter declined 2% to $2.9 billion in 2012 from $3.0 billion in 2011. Premiums were down 2% in the U.S. and down 1% outside the U.S. (up 1% in local currencies). Excluding the effects of foreign currency translation and reinsurance reinstatement premiums related to Storm Sandy, premiums worldwide increased 1%.
The fourth quarter combined loss and expense ratio was 111.2% in 2012 and 89.9% in 2011. The impact of catastrophes on the combined ratio was 29.7 percentage points in the fourth quarter of 2012. The impact of catastrophes in the fourth quarter of 2011 was 0.4 points. Excluding the impact of catastrophes, the fourth quarter combined ratio was 81.5% in 2012 and 89.5% in 2011.
The expense ratio for the fourth quarter was 30.9% in 2012 and 30.6% in 2011.
Property and casualty investment income after taxes for the fourth quarter declined 6% to $296 million in 2012 from $316 million in 2011.
Net income for the fourth quarter of 2012 included net realized investment gains of $90 million before tax ($0.22 per share after-tax). Net income for the fourth quarter of 2011 reflected net realized investment losses of $12 million before tax ($0.03 per share after-tax).
During the fourth quarter of 2012, Chubb repurchased 369,900 shares of its common stock at a total cost of $28 million, or an average cost of $76.54 per share.
Average diluted shares outstanding for the fourth quarter were 266.8 million in 2012 and 282.2 million in 2011.
Book value per share was $60.45 at December 31, 2012 compared to $60.99 at the end of the third quarter and $56.15 at December 31, 2011.
“Storm Sandy took an enormous toll on millions of people in the Northeast region of the United States, including many of our customers,” said John D. Finnegan, Chairman, President and Chief Executive Officer. “Chubb’s claim organization and all of our employees responded with speed, empathy and fairness during and after this devastating event. Helping people recover from catastrophes is a key part of our business, and I am very proud of our employees for their role in helping our customers rebuild their lives and restore their homes and businesses,” he said.
“Although Storm Sandy had a severe impact on Chubb’s fourth quarter results,” said Mr. Finnegan, “the very strong underlying performance of our business units, reflected in our excellent 81.5% combined ratio excluding catastrophes, enabled us to generate an operating profit in the quarter. For the full year 2012, we are very pleased that we achieved $1.4 billion in operating income after-tax despite a catastrophe impact of over $1.1 billion before tax.”
Full Year Results
For the year ended December 31, 2012, net income was $1.5 billion or $5.69 per share, compared to $1.7 billion or $5.76 per share for the year ended December 31, 2011. Operating income totaled $1.4 billion in 2012 and $1.5 billion in 2011. Operating income per share increased to $5.23 in 2012 from $5.12 in 2011.
Net written premiums increased 1% to $11.9 billion in 2012 from $11.8 billion in 2011; excluding the effect of foreign currency translation, premiums increased 2%. Premiums were up 2% in the U.S. and down 3% outside the U.S. (up 1% in local currencies).
The combined ratio in 2012 was 95.3%, the same as in 2011. The impact of catastrophes accounted for 9.6 percentage points of the combined ratio in 2012 and 8.9 points in 2011. Excluding the impact of catastrophes, the combined ratio was 85.7% in 2012 and 86.4% in 2011.
The expense ratio for the year was 31.7% in 2012 and 31.5% in 2011.
Property and casualty investment income after taxes in 2012 declined 5% to $1.2 billion in 2012 from $1.3 billion in 2011.
Net income for 2012 included net realized investment gains of $193 million before tax ($0.46 per share after-tax). Net income for 2011 reflected net realized investment gains of $288 million before tax ($0.64 per share after-tax).
During 2012, Chubb repurchased 13.1 million shares of its common stock at a total cost of $935 million, or an average cost of $71.38 per share.
Average diluted shares outstanding were 271.4 million in 2012 and 291.4 million in 2011.
Fourth Quarter Operations Review
Chubb Personal Insurance (CPI) net written premiums increased 2% in the fourth quarter of 2012 to $1.0 billion. CPI’s combined ratio for the fourth quarter was 117.9% in 2012 and 86.9% in 2011. The impact of catastrophes on CPI’s combined ratio in the fourth quarter was 40.1 percentage points in 2012 and 1.6 points in 2011. Excluding the impact of catastrophes, the combined ratio for the fourth quarter was 77.8% in 2012 and 85.3% in 2011.
Homeowners net written premiums were up 1%, and the combined ratio was 131.3% (69.3% excluding the impact of catastrophes). Personal Automobile net written premiums increased 4%, and the combined ratio was 97.1%. Other Personal lines net written premiums were up 3%, and the combined ratio was 97.1%.
Chubb Commercial Insurance (CCI) net written premiums for the fourth quarter of 2012 declined 2% to $1.2 billion. The combined ratio for the quarter was 118.7% in 2012 and 93.2% in 2011. The impact of catastrophes on CCI’s combined ratio in the fourth quarter accounted for 36.8 points in 2012 compared to a positive impact of 0.4 percentage points in 2011. Excluding the impact of catastrophes, the combined ratio for the fourth quarter was 81.9% in 2012 and 93.6% in 2011.
In the U.S., average fourth quarter CCI renewal rates were up 8%, renewal premium retention was 83% and the ratio of new to lost business was 0.7 to 1.
Chubb Specialty Insurance (CSI) net written premiums declined 7% in the fourth quarter to $688 million. The combined ratio was 88.5%, compared to 89.8% in the fourth quarter of 2011.
Professional Liability (PL) net written premiums declined 5%, and PL had a combined ratio of 93.7%. In the U.S., average PL renewal rates were up 9%, renewal premium retention was 81% and the ratio of new to lost business was 0.6 to 1.
Surety net written premiums were down 15%, and the combined ratio was 51.4%.
2012 Operations Review
For the year ended December 31, 2012, Chubb Personal Insurance net written premiums increased 4% to $4.1 billion. CPI’s combined ratio was 94.4% in 2012 and 98.3% in 2011. The impact of catastrophes accounted for 13.7 percentage points of the combined ratio in 2012 and 13.1 points in 2011. Excluding the impact of catastrophes, the combined ratio was 80.7% in 2012 and 85.2% in 2011.
Homeowners net written premiums increased 3%, and the combined ratio was 94.2% (73.2% excluding the impact of catastrophes). Personal Automobile net written premiums were up 1%, and the combined ratio was 93.4%. Other Personal lines net written premiums increased 8%, and the combined ratio was 95.6%.
Chubb Commercial Insurance net written premiums for 2012 increased 2% to $5.2 billion. The combined ratio was 99.0% in 2012 and 99.3% in 2011. The impact of catastrophes accounted for 11.4 percentage points of the combined ratio in 2012 and 10.5 points in 2011. Excluding the impact of catastrophes, the combined ratio was 87.6% in 2012 and 88.8% in 2011.
In the U.S., average CCI renewal rates were up 8%, renewal premium retention was 84% and the ratio of new to lost business was 0.8 to 1.
Chubb Specialty Insurance net written premiums for 2012 declined 6% to $2.6 billion. The combined ratio was 91.3% in 2012 and 85.1% in 2011.
Professional Liability’s net written premiums were down 5%. PL had a combined ratio of 96.7%. In the U.S., average 2012 renewal rates for PL were up 7%, renewal premium retention was 83% and the ratio of new to lost business was 0.7 to 1.
Surety net written premiums declined 11%, and the combined ratio was 51.4%.
2013 Operating Income Guidance
Based on management’s current outlook, Chubb expects to achieve 2013 operating income per share in the range of $6.40 to $6.80.
This guidance assumes for the full year 2013:
- An increase of 2% to 4% in net written premiums.
- Catastrophe losses that have an impact of 4.0 percentage points on the combined ratio. The impact of each percentage point of catastrophe losses on operating income per share is approximately $0.30.
- A combined ratio between 89% and 91%.
- A decline of 7% to 9% in property and casualty investment income after taxes.
- Approximately 260 million average diluted shares outstanding.
The complete earnings release is available here: Chubb Reports Fourth Quarter 2012 Results
Source: PRNewswire