Warren, NJ – The Chubb Corporation [NYSE: CB] recently reported net income in the fourth quarter of 2013 of $569 million or $2.24 per share, compared to $102 million or $0.38 per share in the fourth quarter of 2012.
Operating income was $526 million or $2.07 per share in the fourth quarter of 2013, compared to $44 million or $0.16 per share in the corresponding quarter of 2012. The company defines operating income as net income excluding after-tax realized investment gains and losses.
Results for the fourth quarter of 2012 were adversely affected by Storm Sandy-related losses net of reinsurance recoverable as well as reinsurance reinstatement premiums.
Net written premiums for the fourth quarter increased 4% to $3.0 billion in 2013 from $2.9 billion in 2012. Premiums were up 7% in the U.S. and down 3% outside the U.S. (up 1% in local currencies). The negative 1% effect of foreign currency translation on fourth quarter premium growth was offset by the impact of reinsurance reinstatement premiums related to Storm Sandy, which reduced net written premiums in the year-ago fourth quarter.
The fourth quarter combined loss and expense ratio was 85.5% in 2013 and 111.2% in 2012. The impact of catastrophes on the fourth quarter combined ratio was 2.1 percentage points in 2013 and 29.7 points in 2012. Excluding the impact of catastrophes, the fourth quarter combined ratio was 83.4% in 2013 and 81.5% in 2012.
The expense ratio for the fourth quarter was 30.8% in 2013 and 30.9% in 2012.
Property and casualty investment income after taxes for the fourth quarter declined 4% to $284 million in 2013 from $296 million in 2012.
Net income for the fourth quarter of 2013 included net realized investment gains of $67 million before tax ($0.17 per share after-tax). Net income for the fourth quarter of 2012 reflected net realized investment gains of $90 million before tax ($0.22 per share after-tax).
During the fourth quarter of 2013, Chubb repurchased 3.5 million shares of its common stock at a total cost of $325 million, or an average cost of $93.72 per share.
Average diluted shares outstanding for the fourth quarter were 254.1 million in 2013 and 266.8 million in 2012.
Book value per share was $64.83 at December 31, 2013 compared to $62.04 at the end of the third quarter and $60.45 at December 31, 2012.
“Chubb had an excellent fourth quarter and an outstanding 2013,” said John D. Finnegan, Chairman, President and Chief Executive Officer. “For the quarter, we produced operating income per share of $2.07 and net income per share of $2.24, both of which were the second-highest of any quarter in our history. Our combined ratio in the quarter was a very strong 85.5%, once again reflecting the impact of higher rates and strong underwriting performance in all of our business units. During the fourth quarter, the market tone in the U.S. remained firm, and we achieved mid- to high-single-digit changes in our rate increase metrics in all of our business units.
“For the full year 2013,” said Mr. Finnegan, “we generated record operating income per share of $8.03 and record net income per share of $9.04. Our excellent results in 2013, and our consistent financial performance over time, demonstrate the successful execution of our business and underwriting strategies. We remain committed to our long-standing strategy of focusing on underwriting discipline and superior claims handling, combined with best-in-class producer relationships, a strong balance sheet and active capital management.”
Full Year Results
For the year ended December 31, 2013, net income was $2.3 billion or a record $9.04 per share, compared to $1.5 billion or $5.69 per share for the year ended December 31, 2012. Operating income totaled $2.1 billion in 2013 and $1.4 billion in 2012. Operating income per share increased to a record $8.03 in 2013 from $5.23 in 2012.
Net written premiums increased 3% to $12.2 billion in 2013 from $11.9 billion in 2012. Foreign currency translation and Storm Sandy reinsurance reinstatement premiums had an insignificant effect on premium growth for the year. Premiums were up 4% in the U.S. and were flat outside the U.S. (up 2% in local currencies).
The combined ratio in 2013 was 86.1%, compared to 95.3% in 2012. The impact of catastrophes accounted for 3.4 percentage points of the combined ratio in 2013 and 9.6 points in 2012. Excluding the impact of catastrophes, the combined ratio was 82.7% in 2013 and 85.7% in 2012.
The expense ratio for the year was 31.9% in 2013 and 31.7% in 2012.
Property and casualty investment income after taxes in 2013 declined 5% to $1.1 billion in 2013 from $1.2 billion in 2012.
Net income for 2013 included net realized investment gains of $402 million before tax ($1.01 per share after-tax). Net income for 2012 reflected net realized investment gains of $193 million before tax ($0.46 per share after-tax).
During 2013, Chubb repurchased 14.9 million shares of its common stock at a total cost of $1.3 billion, or an average cost of $87.33 per share.
Average diluted shares outstanding were 259.4 million in 2013 and 271.4 million in 2012.
Fourth Quarter Operations Review
Chubb Personal Insurance (CPI) net written premiums increased 6% in the fourth quarter of 2013 to $1.1 billion. Net written premiums were up 3% excluding reinsurance reinstatement premiums related to Storm Sandy. CPI’s combined ratio for the fourth quarter was 83.5% in 2013 and 117.9% in 2012. The impact of catastrophes on CPI’s combined ratio in the fourth quarter was 5.3 percentage points in 2013 and 40.1 points in 2012. Excluding the impact of catastrophes, the combined ratio for the fourth quarter was 78.2% in 2013 and 77.8% in 2012.
Homeowners net written premiums were up 6% (up 2% excluding Storm Sandy reinsurance reinstatement premiums), and the combined ratio was 75.8% (67.3% excluding the impact of catastrophes). Personal Automobile net written premiums increased 2%, and the combined ratio was 93.9%. Other Personal lines net written premiums were up 9%, and the combined ratio was 96.8%.
Chubb Commercial Insurance (CCI) net written premiums for the fourth quarter of 2013 increased 4% to $1.3 billion. Net written premiums were up 2% excluding reinsurance reinstatement premiums related to Storm Sandy. The combined ratio for the quarter was 89.0% in 2013 and 118.7% in 2012. The impact of catastrophes on CCI’s combined ratio in the fourth quarter accounted for 0.6 points in 2013 compared to an impact of 36.8 percentage points in 2012. Excluding the impact of catastrophes, the combined ratio for the fourth quarter was 88.4% in 2013 and 81.9% in 2012.
In the U.S., average fourth quarter CCI renewal rates were up 6%, 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 increased 2% in the fourth quarter to $705 million. The combined ratio was 81.9%, compared to 88.5% in the fourth quarter of 2012.
Professional Liability (PL) net written premiums increased 2%, and PL had a combined ratio of 85.9%. In the U.S., average PL renewal rates were up 8%, renewal premium retention was 84% and the ratio of new to lost business was 0.8 to 1.
Surety net written premiums were up 4%, and the combined ratio was 53.9%.
2013 Operations Review
For the year ended December 31, 2013, Chubb Personal Insurance net written premiums increased 5% to $4.3 billion. Net written premiums were up 4% excluding reinsurance reinstatement premiums related to Storm Sandy. CPI’s combined ratio was 87.0% in 2013 and 94.4% in 2012. The impact of catastrophes accounted for 7.2 percentage points of the combined ratio in 2013 and 13.7 points in 2012. Excluding the impact of catastrophes, the combined ratio was 79.8% in 2013 and 80.7% in 2012.
Homeowners net written premiums increased 4% (increased 3% excluding Storm Sandy reinsurance reinstatement premiums), and the combined ratio was 82.3% (70.8% excluding the impact of catastrophes). Personal Automobile net written premiums were up 6%, and the combined ratio was 94.8%. Other Personal lines net written premiums increased 6%, and the combined ratio was 94.8%.
Chubb Commercial Insurance net written premiums for 2013 increased 2% to $5.3 billion. Net written premiums were up 1% excluding reinsurance reinstatement premiums related to Storm Sandy. The combined ratio was 86.5% in 2013 and 99.0% in 2012. The impact of catastrophes accounted for 2.1 percentage points of the combined ratio in 2013 and 11.4 points in 2012. Excluding the impact of catastrophes, the combined ratio was 84.4% in 2013 and 87.6% in 2012.
In the U.S., average CCI renewal rates were up 7%, 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 2013 increased 3% to $2.6 billion. The combined ratio was 84.3% in 2013 and 91.3% in 2012.
Professional Liability’s net written premiums were up 2%. PL had a combined ratio of 89.3%. In the U.S., average 2013 renewal rates for PL were up 8%, renewal premium retention was 84% and the ratio of new to lost business was 0.8 to 1.
Surety net written premiums increased 6%, and the combined ratio was 47.2%.
January 2014 Winter Weather Losses
Chubb’s first quarter 2014 results will be impacted by losses related to the severe winter weather that has occurred during the month of January in the United States. To date, that weather has resulted in two declared catastrophes related to the freezing and winter storms that occurred between January 3rd and 8th in 19 states. Chubb’s preliminary estimate of the losses from these two catastrophes is in the range of $150 million to $200 million before tax or $0.39 to $0.52 per share after tax. This estimate does not include an estimate for any other January weather related losses.
2014 Operating Income Guidance
Based on management’s current outlook, Chubb expects to achieve 2014 operating income per share in the range of $7.10 to $7.40.
This operating income guidance assumes for the full year 2014:
- An increase of 2% to 4% in net written premiums.
- Catastrophe losses that have an impact of 5 percentage points on the 2014 combined ratio. This assumed impact is 1 point higher than the assumed 4 points of catastrophe losses in Chubb’s initial operating income per share guidance for 2013 to take into account anticipated higher than usual catastrophe losses in the first quarter of 2014. The impact of each percentage point of catastrophe losses on operating income per share is approximately $0.33.
- A combined ratio between 89% and 90%.
- A decline of 4% to 6% in property and casualty investment income after taxes.
- Approximately 245 million average diluted shares outstanding.
The guidance and related assumptions are subject to the risks outlined in the company’s forward-looking information safe-harbor statements
The complete earnings release is available here: Chubb Fourth Quarter 2013 Results
Source: Chubb