Chubb’s 2012 Q4 Profit Drops 77% to $102M; $882M Sandy Loss Reported

February 1, 2013

The Chubb Corp. reported $102 million net profit for its 2012 fourth quarter, down 77.4 percent compared to the fourth quarter of 2011 when the insurer reported $452 million profit. Chubb’s net profit for the full-year 2012 was $1.5 billion, compared to $1.7 billion profit for the full-year 2011.

The latest quarterly results were hurt by losses stemming from Superstorm Sandy. The Warren, N.J.-headquartered insurer posted Sandy-related costs of $882 million before tax. This amount includes $829 million of losses net of reinsurance recoverable, as well as reinsurance reinstatement premium costs of $53 million.

Sandy was the biggest catastrophe loss event for Chubb in terms of the number of claims and the net impact.

“For Chubb and the property/casualty industry, the big story for the fourth quarter of 2012 certainly was Storm Sandy, which resulted in tragic loss of life, human suffering and devastating damages to residential and commercial property across large, densely populated regions of the country,” CEO John Finnegan said during an earnings conference call Thursday.

“Although Sandy generated the largest number of claims of any catastrophe in Chubb history, by far, our people rose to the challenge, bringing empathy and moral support, along with tangible help, to people in distress, at a time when many of our employees were affected by the storm in the same way as our customers,” Finnegan said.

“Sandy had a huge financial impact on Chubb, $882 million before tax — the largest net impact of any catastrophe in the history of Chubb,” Finnegan said.

However, he continued, Chubb produced an operating profit in the quarter, by continuing to expand margins through the pursuit of renewal rate increases, writing new business only when the company believes it is securing adequate rates, and continually refining its risk selection to boost the profitability of its book of business.

Net written premiums for the 2012 fourth quarter were $2.9 billion, down 2 percent from $3.0 billion reported in the fourth quarter for 2011. Premiums were down 2 percent in the U.S. and down 1 percent outside the U.S. (up 1 percent in local currencies). Excluding the effects of foreign currency translation and reinsurance reinstatement premiums related to Storm Sandy, premiums worldwide increased 1 percent. Net written premiums for the full-year 2012 were $11.9 billion, up 1 percent from $11.8 billion for the full-year 2011.

The overall combined ratio for the 2012 fourth quarter deteriorated to 111.2 percent, compared to 89.9 percent in the fourth quarter of 2011. The impact of catastrophes on the combined ratio was 29.7 percentage points in the 2012 fourth quarter. In contrast, the impact of catastrophes in the 2011 fourth quarter was only 0.4 points. Excluding the impact of catastrophes, the 2012 fourth quarter combined ratio was 81.5 percent, compared to 89.5 percent in the 2011 fourth quarter.

The overall combined ratio for full-year 2012 was 95.3 percent, the same as in full-year 2011. The impact of catastrophes accounted for 9.6 percentage points of the combined ratio in 2012 and 8.9 points in 2011. Excluding the impact of catastrophes, the combined ratio was 85.7 percent in 2012 and 86.4 percent in 2011.

Property and casualty investment income after taxes for the 2012 fourth quarter was $296 million, down 6 percent from $316 million during the 2011 fourth quarter. For full-year 2012, property and casualty investment income after taxes was $1.2 billion, down 5 percent from $1.3 billion in 2011.

Results From Individual Business Segments

 
• Chubb Personal Insurance (CPI) net written premiums increased 2 percent in the fourth quarter of 2012 to $1.0 billion. CPI’s combined ratio for the fourth quarter was 117.9 percent in 2012 and 86.9 percent in 2011. The impact of catastrophes on CPI’s combined ratio in the fourth quarter was 40.1 percentage points in 2012 and 1.6 points in 2011. Excluding the impact of catastrophes, the combined ratio for the fourth quarter was 77.8 percent in 2012 and 85.3 percent in 2011.

For the 2012 fourth quarter, homeowners net written premiums were up 1 percent, and the combined ratio was 131.3 percent (69.3 percent excluding the impact of catastrophes). Personal Automobile net written premiums increased 4 percent, and the combined ratio was 97.1 percent. Other Personal lines net written premiums were up 3 percent, and the combined ratio was 97.1 percent.

For full-year 2012, CPI net written premiums increased 4 percent to $4.1 billion. CPI’s combined ratio was 94.4 percent in 2012 and 98.3 percent in 2011. The impact of catastrophes accounted for 13.7 percentage points of the combined ratio in 2012 and 13.1 points in 2011. Excluding the impact of catastrophes, the combined ratio was 80.7 percent in 2012 and 85.2 percent in 2011.

For the full-year 2012, homeowners net written premiums increased 3 percent, and the combined ratio was 94.2 percent (73.2 percent excluding the impact of catastrophes). Personal Automobile net written premiums were up 1 percent, and the combined ratio was 93.4 percent. Other Personal lines net written premiums increased 8 percent, and the combined ratio was 95.6 percent.

• Chubb Commercial Insurance (CCI) net written premiums for the fourth quarter of 2012 declined 2 percent to $1.2 billion. The combined ratio for the quarter was 118.7 percent in 2012 and 93.2 percent in 2011. The impact of catastrophes on CCI’s combined ratio in the fourth quarter accounted for 36.8 points in 2012 compared to a positive impact of 0.4 percentage points in 2011. Excluding the impact of catastrophes, the combined ratio for the fourth quarter was 81.9 percent in 2012 and 93.6 percent in 2011.

For the 2012 fourth quarter, in the U.S., average fourth quarter CCI renewal rates were up 8 percent, renewal premium retention was 83 percent and the ratio of new to lost business was 0.7 to 1.

For full-year 2012, net written premiums for 2012 increased 2 percent to $5.2 billion. The combined ratio was 99.0 percent in 2012 and 99.3 percent in 2011. The impact of catastrophes accounted for 11.4 percentage points of the combined ratio in 2012 and 10.5 points in 2011. Excluding the impact of catastrophes, the combined ratio was 87.6 percent in 2012 and 88.8 percent in 2011.

For full-year 2012, in the U.S., average CCI renewal rates were up 8 percent, renewal premium retention was 84 percent and the ratio of new to lost business was 0.8 to 1.

• Chubb Specialty Insurance (CSI) net written premiums declined 7 percent in the 2012 fourth quarter to $688 million. The combined ratio was 88.5 percent, compared to 89.8 percent in the fourth quarter of 2011.

Professional Liability (PL) net written premiums declined 5 percent, and PL had a combined ratio of 93.7 percent. In the U.S., average PL renewal rates were up 9 percent, renewal premium retention was 81 percent and the ratio of new to lost business was 0.6 to 1. Surety net written premiums were down 15 percent, and the combined ratio was 51.4 percent.

For full-year 2012, CSI net written premiums for 2012 declined 6 percent to $2.6 billion. The combined ratio was 91.3 percent in 2012 and 85.1 percent in 2011.

Professional Liability’s net written premiums were down 5 percent for full-year 2012. PL had a combined ratio of 96.7 percent. In the U.S., average 2012 renewal rates for PL were up 7 percent, renewal premium retention was 83 percent and the ratio of new to lost business was 0.7 to 1. For full-year 2012, surety net written premiums declined 11 percent, and the combined ratio was 51.4 percent.

 

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