Warren, NJ – The Chubb Corporation [NYSE: CB] recently reported that net income in the third quarter of 2015 was $601 million compared to $594 million in the third quarter of 2014. Net income per share increased 5% to $2.60 from $2.47. It was the highest net income per share for any quarter in Chubb’s history.
Operating income, which the company defines as net income excluding after-tax realized investment gains and losses, was $547 million in the third quarter of 2015 compared to $522 million in the third quarter of 2014. Operating income per share increased 9% to a record $2.37 from $2.17.
The impact of catastrophes in the third quarter was $32 million before tax ($0.09 per share after-tax) in 2015 compared to $74 million before tax ($0.20 per share after-tax) in 2014.
The third quarter combined loss and expense ratio was 83.3% in 2015 compared to 85.8% in 2014. The impact of catastrophes accounted for 1.0 percentage point of the combined ratio in the third quarter of 2015 compared to 2.4 points in the third quarter of 2014. Excluding the impact of catastrophes, the third quarter combined ratio improved to 82.3% in 2015 from 83.4% in 2014.
Third quarter favorable development before tax on prior-year reserves was approximately $180 million in 2015, compared to $155 million in 2014. The favorable impact of reserve development on the third quarter combined ratio was about 5.7 points in 2015 and 5.0 points in 2014. The third quarter impact on development from prior-year catastrophes was 0.1 points adverse in 2015 and 0.2 points adverse in 2014.
The expense ratio for the third quarter of 2015 was 31.5% compared to 31.8% in the corresponding year-earlier quarter.
Net written premiums for the third quarter of 2015 were $3.2 billion, unchanged from the third quarter of 2014. Excluding the effect of foreign currency translation, premiums increased approximately 3%. Premiums were up 4% in the U.S. and down 12% outside the U.S. (up 2% in local currencies).
Property and casualty investment income after taxes for the third quarter declined 6% to $255 million in 2015 from $270 million in 2014.
Net income for the third quarter of 2015 reflected net realized investment gains of $82 million before tax ($0.23 per share after-tax), compared to $110 million before tax ($0.30 per share after-tax) in the third quarter of 2014. Third quarter net realized investment gains included gains from alternative investments of $0.14 per share in 2015 and $0.12 per share in 2014.
Book value per share at September 30, 2015 was $72.09, compared to $70.12 at year-end 2014 and $70.00 on September 30, 2014.
Average diluted shares outstanding for the third quarter were 231.1 million in 2015 and 240.6 million in 2014.
Nine-Month Results
For the first nine months of 2015, net income declined 5% to $1.5 billion. Net income per share for the first nine months increased 1% to $6.33 from $6.28.
Operating income for the first nine months of 2015 increased 6% to $1.4 billion compared to $1.3 billion in the first nine months of 2014. Operating income per share for the first nine months of 2015 increased 12% to $6.01 from $5.35.
The impact of catastrophes in the first nine months of 2015 was $430 million before tax ($1.20 per share after-tax), compared to $419 million before tax ($1.11 per share after-tax) in the first nine months of 2014.
The combined ratio for the first nine months was 87.5% in 2015 compared to 89.6% in 2014. The impact of catastrophes in the first nine months accounted for 4.6 percentage points of the combined ratio in both 2015 and 2014. Excluding the impact of catastrophes, the combined ratio for the first nine months improved to 82.9% in 2015 from 85.0% in 2014.
The expense ratio for the first nine months was 31.4% in 2015 and 31.7% in 2014.
Net written premiums for the first nine months of 2015 increased 1% to $9.6 billion. Excluding the effect of foreign currency translation, premiums increased approximately 4%. Premiums were up 5% in the U.S. and down 9% outside the U.S. (up 4% in local currencies).
Property and casualty investment income after taxes for the first nine months declined 5% to $782 million in 2015 from $822 million in 2014.
Net income for the first nine months of 2015 reflected net realized investment gains of $113 million before tax ($0.32 per share after-tax). Net income for the first nine months of 2014 reflected net realized investment gains of $351 million before tax ($0.93 per share after-tax).
Average diluted shares outstanding for the first nine months were 232.1 million in 2015 and 245.4 million in 2014.
Third Quarter Operations Review
Chubb Personal Insurance (CPI) net written premiums declined 1% in the third quarter of 2015 to $1.2 billion. CPI’s combined ratio for the quarter improved to 84.9% from 85.9% in the third quarter of 2014. The impact of catastrophes in the third quarter accounted for 2.0 percentage points of the combined ratio in 2015 and 3.5 points in 2014. Excluding the impact of catastrophes, CPI’s third quarter combined ratio was 82.9% in 2015 and 82.4% in 2014. Third quarter favorable development before tax on prior-year CPI reserves was insignificant in 2015, compared to approximately $10 million in 2014.
Net written premiums for Homeowners increased 1%, and the combined ratio was 77.2%. Excluding the 3.0 percentage point impact of catastrophes, the Homeowners combined ratio was 74.2%. Personal Automobile net written premiums declined 8%, and the combined ratio was 98.5%. Other Personal lines premiums were down 2%, and the combined ratio was 97.6%.
Chubb Commercial Insurance (CCI) net written premiums increased 3% in the third quarter of 2015 to $1.3 billion. The combined ratio for the third quarter improved to 86.3% in 2015 from 89.5% in 2014. The impact of catastrophes in the third quarter accounted for 0.7 percentage points of the combined ratio in 2015 and 2.6 points in 2014. Excluding the impact of catastrophes, CCI’s third quarter combined ratio was 85.6% in 2015 and 86.9% in 2014. Third quarter favorable development before tax on prior-year CCI reserves was approximately $80 million in 2015, compared to $55 million in 2014.
Average third quarter renewal rates in the U.S. were flat for CCI, which retained 88% of the U.S. premiums that came up for renewal. In the U.S., the ratio of new to lost business was 1.3 to 1.
Chubb Specialty Insurance (CSI) net written premiums in the third quarter of 2015 declined 3% to $681 million. The third quarter combined ratio improved to 74.8% in 2015 from 78.3% in 2014. Third quarter favorable development before tax on prior-year CSI reserves was approximately $95 million in 2015, compared to $90 million in 2014.
Professional Liability (PL) net written premiums were down 4%, and the business had a combined ratio of 78.1%. In the U.S., average third quarter PL renewal rates were up 1%, premium renewal retention was 89% and the ratio of new to lost business was 1.4 to 1.
Surety net written premiums were up 4%, and the combined ratio was 52.1%.
Reinsurance Assumed, which is in runoff, had favorable development before tax on its prior-year reserves of approximately $5 million in the third quarter of 2015, compared to none in the third quarter of 2014.
The complete earnings release is available here: Chubb Third Quarter 2015 Results
Source: Chubb