Warren, NJ – The Chubb Corporation [NYSE: CB] today reported that net income in the second quarter of 2013 was $579 million compared to $404 million in the second quarter of 2012. Net income per share increased 49% to $2.21 from $1.48.
Operating income, which the company defines as net income excluding after-tax realized investment gains and losses, was $463 million in the second quarter of 2013, compared to $374 million in the second quarter of 2012. Operating income per share increased 29% to $1.77 from $1.37.
Average diluted shares outstanding for the second quarter were 261.5 million in 2013 and 273.3 million in 2012.
The impact of catastrophes in the second quarter of 2013 was $237 million before tax ($0.59 per share after tax); catastrophe losses during the quarter were related primarily to various severe storms in the central United States and storms and flooding in southern Alberta, Canada. In the second quarter of 2012, the impact of catastrophes was $223 million before tax ($0.53 per share after tax).
The second quarter combined loss and expense ratio improved to 88.8% in 2013 from 93.8% in 2012. The impact of catastrophes accounted for 7.9 percentage points of the combined ratio in the second quarter of 2013, compared to 7.5 points in the second quarter of 2012. Excluding the impact of catastrophes, the second quarter combined ratio was 80.9% in 2013 and 86.3% in 2012.
The expense ratio for the second quarter of 2013 was 32.1%, compared to 31.3% in the corresponding year-earlier quarter.
Net written premiums for the second quarter of 2013 were flat at $3.1 billion. Foreign currency translation had an insignificant effect on total premium growth in the second quarter. Premiums increased 1% in the U.S. and declined 3% outside the U.S. (declined 1% in local currencies).
Property and casualty investment income after taxes for the second quarter declined 6% to $286 million in 2013 from $303 million in 2012.
Net income for the second quarter of 2013 reflected net realized investment gains of $179 million before tax ($0.44 per share after-tax), compared to $47 million before tax ($0.11 per share after-tax) in the second quarter of 2012.
During the second quarter, Chubb repurchased approximately 3.7 million shares of its common stock at a total cost of $323 million (an average of $87.28 per share). As of June 30, 2013, there remained approximately $758 million available for share repurchases under the current authorization.
“Chubb produced excellent results in the second quarter of 2013,” said John D. Finnegan, Chairman, President and Chief Executive Officer. “We generated operating income of $1.77 per share and net income of $2.21 per share, both of which were among the highest of any quarter in Chubb’s history. These results were achieved despite a $0.59 per share adverse impact of catastrophe losses. Our combined ratio excluding catastrophes was an outstanding 80.9%, once again reflecting the impact of higher rates and strong underlying underwriting performance. We remain encouraged by the renewal rate increases we continued to obtain in all of our business units.”
Six-Month Results
- For the first six months of 2013, net income was $1.2 billion compared to $910 million in the first half of 2012. Net income per share for the first half increased 42% to a record $4.69 from $3.31.
- Operating income for the first six months of 2013 was $1.0 billion compared to $843 million in the first half of 2012. Operating income per share for the first half increased 27% to a record $3.91 from $3.07.
- Average diluted shares outstanding for the first six months were 263.2 million in 2013 and 274.8 million in 2012.
- The impact of catastrophes in the first six months of 2013 was $255 million before tax ($0.63 per share after-tax), compared to $247 million before tax ($0.58 per share after-tax) in the first half of 2012.
- The combined ratio for the first six months was 86.7% in 2013 compared to 92.0% in 2012. The impact of catastrophes in the first half accounted for 4.3 percentage points of the combined ratio in 2013 and 4.2 points in 2012. Excluding the impact of catastrophes, the combined ratio in the first half was 82.4% in 2013 and 87.8% in 2012.
- The expense ratio for the first six months was 32.2% in 2013 and 31.7% in 2012.
- Net written premiums for the first six months of 2013 increased 2% to $6.2 billion. Foreign currency translation had an insignificant effect on total premium growth in the first half. Premiums were up 2% in the U.S. and up 2% outside the U.S. (up 3% in local currencies).
- Property and casualty investment income after taxes for the first six months declined 6% to $574 million in 2013 from $611 million in 2012.
- Net income for the first six months of 2013 reflected net realized investment gains of $317 million before tax ($0.78 per share after-tax). Net income for the first half of 2012 reflected net realized investment gains of $103 million before tax ($0.24 per share after-tax).
- During the first six months of 2013, Chubb repurchased approximately 7.6 million shares of common stock at a total cost of $649 million (an average of $85.01 per share).
Outlook for 2013
“In light of our performance in the first half of the year and our outlook for the second half,” said Mr. Finnegan, “we have increased our guidance for full year 2013 operating income per share to a range of $7.30 to $7.50 from the $6.40 to $6.80 range we provided in our January 2013 guidance. We have raised our guidance despite an increase in our catastrophe loss assumption for the full year from 4.0 percentage points to 4.6 points.”
The impact of each percentage point of catastrophe losses on 2013 full year operating income per share is approximately $0.30.
The revised guidance also assumes for full year 2013:
- A 1% to 3% increase in net written premiums, including a 1% negative impact of foreign currency translation based on exchange rates as of June 30, 2013.
- A combined ratio of about 88%.
- A decline of 6% to 8% in property and casualty investment income after taxes.
- Approximately 259 million average diluted shares outstanding for the year.
Guidance and related assumptions are subject to the risks outlined in the company’s forward-looking information safe-harbor statements.
Second Quarter Operations Review
Chubb Personal Insurance (CPI) net written premiums increased 4% in the second quarter of 2013 to $1.2 billion. CPI’s combined ratio for the quarter improved to 89.6% from 91.2% in the second quarter of 2012. The impact of catastrophe losses in the second quarter accounted for 12.7 percentage points of the combined ratio in 2013 and 11.5 points in 2012. Excluding the impact of catastrophe losses, CPI’s second quarter combined ratio was 76.9% in 2013 and 79.7% in 2012.
Net written premiums for Homeowners increased 4%, and the combined ratio was 86.9%. Personal Automobile net written premiums increased 5%, and the combined ratio was 95.3%. Other Personal lines premiums increased 3%, and the combined ratio was 93.3%.
Chubb Commercial Insurance (CCI) net written premiums declined 3% in the second quarter of 2013 to $1.3 billion. The combined ratio for the second quarter improved to 89.9% in 2013 from 97.5% in 2012. The impact of catastrophe losses in the second quarter accounted for 8.1 percentage points of the combined ratio in 2013 and 8.2 points in 2012. Excluding the impact of catastrophe losses, CCI’s second quarter combined ratio was 81.8% in 2013 and 89.3% in 2012.
Average second quarter renewal rates in the U.S. were up 8% for CCI, which retained 83% of the U.S. premiums that came up for renewal. In the U.S., the ratio of new to lost business was 0.7 to 1.
Chubb Specialty Insurance (CSI) net written premiums declined 2% in the second quarter of 2013 to $626 million. The second quarter combined ratio improved to 86.0% in 2013 from 91.4% in 2012.
Professional Liability (PL) net written premiums were down 1%, and the business had a combined ratio of 91.9%. In the U.S., average second quarter PL renewal rates were up 9%, premium renewal retention was 84% and the ratio of new to lost business was 0.7 to 1.
Surety net written premiums were down 7%, and the combined ratio was 42.1%.
The complete earnings release is available here: Chubb Second Quarter 2013 Results
Source: Chubb