The Chubb Corp. reported $404 million profit for its second quarter, declining 3.6 percent from $419 million reported a year earlier.
The results were hampered by weaker investment results and significant catastrophe losses, though smaller compared to the cat losses from the 2011 second-quarter period.
In Chubb’s U.S. commercial lines, average renewal rate increased in the second quarter by 9 percent, continuing the positive rate momentum of the previous four quarters. This 9 percent rate increase compares with the 8 percent obtained in the first quarter. One year ago, during the 2011 second quarter, average U.S. commercial renewal rate rose by just 2 percent.
Total net premiums written for the quarter were $3.1 billion, up slightly from $3.055 billion one year ago. Net written premiums were up 1 percent, driven by Chubb Personal and Chubb Commercial Insurance segments, which were up 4 percent and 3 percent, respectively. Growth at these two segments was partially offset by a 6 percent decline in Chubb’s Specialty premiums.The combined ratio for the quarter was 93.8 percent, improving from 94.9 percent one year ago. The impact of catastrophes accounted for 7.5 percentage points of the combined ratio, compared to 11.3 points one year ago. Pre-tax catastrophe losses were $223 million for the quarter, compared with $329 million a year earlier.
Underwriting income for the quarter was $159 million, compared with $135 million for the same period last year.
Investment income for the second quarter was $373 million, falling from $394 million reported during the same quarter last year.
“We had a strong second quarter even with high catastrophe losses from multiple hail and windstorm events, continued slow economic growth and the impact of historically low interest rate on investment income,” CEO John Finnegan said during the company’s earnings conference call Thursday.
“We are also encouraged by the continued upward momentum of rate increases in all our businesses,” CEO Finnegan said.
Commercial Lines Renewal Rate Hike Led by Monoline Property
Paul Krump, executive vice president of The Chubb Corp. and president of Commercial and Specialty Lines, observed that Chubb Commercial Insurance secured U.S. renewal rate increases in each line of business in the second quarter.
“Once again, monoline property rates increased the most — with a mid-teen average, followed by general liability, workers’ comp, package, excess umbrella, automobile, boiler and marine,” he said.
Krump explained that further evidence of an improved rate environment can be found in the higher proportion of accounts that renewed with rate increases. In the second quarter, around 90 percent of Chubb’s U.S. commercial accounts that renewed got a rate increase, compared with 80 percent in the first quarter.
He said Chubb Commercial Insurance’s second quarter U.S. renewal retention was 84 percent, up 1 point from the first quarter. Also, he added, the spread between rates on renewals and new customer businesses is now very small.
Outside of the U.S., average commercial insurance renewal rates in Canada rose from the low single digits in the first quarter to mid-single digits in the second quarter. In Europe, average renewal rates were up by low-single digits in the second quarter, in line with rate increase in the first quarter. Chubb Commercial Insurance also got rate increases in Australia and Asia, while average renewal rates in Latin America were flat.
Average U.S. Professional Liability Renewal Rates Increased 7%
In Chubb’s Specialty Insurance, the company executives said they are very encouraged that average renewal rates for professional liability in the U.S. increased 7 percent in the second quarter, continuing the solid positive momentum that began in the 2011 fourth quarter.
The 7 percent increase was the strongest quarterly renewal rate hike since 2003, the company executives said. And it compares favorably to a 4 percent increase in the first quarter, and a negative 2 percent in the second quarter of last year.
Krump said Chubb Specialty Insurance got renewal rate hikes in the U.S. in each of its professional liability lines of business in the second quarter.
He said rate hikes were led by private company and public company directors-and-officers, both of which experienced average renewal rate hikes in the low double digits. These were followed by EPL, crime, not-for-profit directors-and-officers, E&O and fiduciary.
“In addition to driving renewal rates, we are increasing deductibles, shifting layers, refining our new business appetite and culling customer segments where we are unable to achieve rate adequacy,” he added.
Q2 Results From Individual Segments
Looking at specific segment results for the second quarter, Chubb Personal Insurance net written premiums increased 4 percent in the second quarter to $1.1 billion. Personal Insurance combined ratio for the quarter was 91.2 percent, improving from 96.9 percent in the second quarter of 2011.
The impact of catastrophe losses in the second quarter accounted for 11.5 percentage points of the combined ratio in 2012 and 14.5 points in 2011.
Net written premiums for homeowners segment increased 4 percent, and the combined ratio was 90.3 percent. Personal automobile net written premiums rose 2 percent, and the combined ratio was 93.2 percent. Other personal lines premiums rose 8 percent, and the combined ratio was 92.6.
Chubb Commercial Insurance net written premiums were up 3 percent in the second quarter to $1.4 billion. The combined ratio for the second quarter was 97.5 percent in 2012 and 102.5 percent in 2011. The impact of cat losses in the second quarter accounted for 8.2 percentage points of the combined ratio in 2012 and 15.2 points in 2011.
Average second quarter renewal rates in the U.S. were up 9 percent for Chubb Commercial Insurance, which retained 84 percent of the U.S. premiums that came up for renewal. In the U.S., the ratio of new to lost business was 0.9 to 1.
Chubb Specialty Insurance net written premiums were down 6 percent in the second quarter to $638 million. The second quarter combined ratio was 91.4 percent in 2012 and 80.0 percent in 2011.
Professional Liability net written premiums were down 7 percent, and the business had a combined ratio of 97.9 percent. In the U.S., average second quarter professional liability renewal rates were up 7 percent, premium renewal retention was 82 percent and the ratio of new to lost business was 0.7 to 1. Surety net written premiums were down 2 percent, and the combined ratio was 42.8 percent.