The Chubb Corp. reported that net income in the third quarter of 2007 was $738 million or $1.87 per share, compared to $604 million or $1.43 per share in the third quarter of 2006.
Operating income, which the company defines as net income excluding after-tax realized investment gains and losses, increased to $662 million from $579 million in the third quarter of 2006. Operating income per share increased 23% to a record $1.68 from $1.37.
Total net written premiums for the third quarter declined 2% to $2.9 billion. Net written premiums for the insurance business were flat – down 3% in the U.S. and up 12% outside the U.S. (4% in local currencies). Net written premiums for the reinsurance assumed business declined 65%, reflecting the impact of the Chubb Re-Harbor Point transaction completed in December 2005.
The third quarter combined loss and expense ratio was 81.6% in 2007, compared to 85.5% in 2006. Catastrophe losses accounted for 2.0 percentage points of the combined ratio in the third quarter of 2007 compared to 1.5 points in the third quarter of 2006. The expense ratio for the third quarter was 29.8% in 2007 and 28.6% in 2006.
Property and casualty investment income after taxes for the third quarter increased 10% to $324 million in 2007 from $295 million in 2006.
During the third quarter, Chubb repurchased 10,193,239 shares of its common stock at a total cost of $519 million. As of September 30, 2007, there were 7,926,122 shares of common stock available for repurchase under the current authorization.
Nine-Month Results
For the first nine months of 2007, net income was $2.2 billion or $5.33 per share, compared with $1.9 billion or $4.43 per share for the first nine months of 2006. Operating income for the first nine months of 2007 totaled a record $1.9 billion or $4.81 per share, compared with $1.8 billion or $4.14 per share for the first nine months of 2006.
Total net written premiums for the first nine months declined 2% to $8.9 billion. Net written premiums for the insurance business increased 1% — down 1% in the U.S. and up 8% outside the U.S. (2% in local currencies). Net written premiums for the reinsurance assumed business declined 70%.
The combined loss and expense ratio for the first nine months was 82.6% in 2007, compared to 84.5% in 2006. The impact of catastrophes accounted for 2.8 percentage points of the combined ratio in the first nine months of 2007 compared to 1.4 points in the first nine months of 2006. The expense ratio for the first nine months was 29.9% in 2007 and 28.7% in 2006.
Property and casualty investment income after taxes for the first nine months increased 9% to $942 million in 2007 from $862 million in 2006.
During the first nine months, Chubb repurchased 31,919,816 shares of its common stock at a total cost of $1.7 billion.
Revised Guidance
“Chubb’s record third quarter operating income reflects our continued emphasis on underwriting excellence, which resulted in a record-low combined ratio with outstanding profit contributions from each of our three business units,” said John D. Finnegan, Chairman, president and chief executive officer.
Finnegans aid the company is increasing its 2007 calendar year operating income per share guidance to a range of $6.05 to $6.15 from the $5.70 to $6.10 range we provided in July.
“This revised guidance continues to assume 4 percentage points of catastrophe losses for the year,” said Finnegan. “Since the impact of catastrophe losses in the first nine months was only 2.8 points, this implies 7.7 points of catastrophe losses in the fourth quarter, which is substantially higher than our historic fourth-quarter average. However, given the uncertain impact of the California wildfires, we decided to be conservative and maintain our catastrophe assumption for the year,” he said.
“The strength of our operating performance is evidenced by the fact that despite the high level of assumed catastrophe losses, we are still projecting fourth-quarter operating income per share in the range of $1.24 to $1.34,” said Finnegan. The impact on operating income per share of each point of catastrophe losses in the fourth quarter is about five cents. Guidance and related assumptions are subject to the risks outlined in the company’s forward-looking information safe-harbor statement below.
Third Quarter Operations Review
Chubb Personal Insurance (CPI) net written premiums grew 7% in the third quarter to $977 million. CPI’s combined ratio for the quarter improved to 83.3% from 84.1% in the third quarter of 2006. Catastrophe losses for the quarter were 5.2 percentage points in 2007 and 4.1 points in 2006.
Net written premiums for Homeowners grew 8%, and the combined ratio was 76.8%. Personal Automobile net written premiums declined 7%, and the combined ratio was 91.1%. Other Personal lines grew 22% and had a combined ratio of 99.0%.
Chubb Commercial Insurance (CCI) net written premiums declined 3% in the third quarter to $1.2 billion. The combined ratio for the quarter improved to 84.4% in 2007 from 85.4% in 2006. Catastrophe losses accounted for 0.8 percentage points in the third quarter of 2007 and 0.7 points in the corresponding quarter of 2006.
Average third quarter renewal rates in the U.S. were down 4% for CCI, which retained 84% of the U.S. premiums that came up for renewal. In the U.S., the ratio of new to lost business was 0.8 to 1.
Chubb Specialty Insurance (CSI) net written premiums declined 3% in the third quarter to $726 million. The combined ratio improved to 76.3% from 86.4% in the third quarter of 2006.
Professional Liability (PL) net written premiums declined 4%, and the business had a combined ratio of 81.8%. Average third quarter renewal rates in the U.S. were down 6% for PL, 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 1.4 to 1.
Surety net written premiums were up 3%, and the combined ratio was 30.8%.
Webcast Conference Call to be Held Today at 5 P.M.
Chubb’s senior management will discuss the company’s third quarter performance with investors and analysts today, October 23, at 5 P.M. Eastern Daylight Time. The conference call will be webcast live on the Internet at http://www.chubb.comand/ archived later in the day for replay.
Source: Chubb
Topics Catastrophe USA Profit Loss Chubb
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