The Chubb Corporation reported that net written premiums grew 33 percent as insurance rates continued to rise in all three strategic business units and as the company continued to attract new customers.
Chubb had an operating loss of $270.7 million or $1.59 per share in the third quarter, including a $625 million ($2.38 per share after-tax) strengthening of reserves for asbestos claims. In the corresponding quarter of 2001, Chubb had an operating loss of $240.6 million or $1.41 per share, including $645 million ($2.46 per share after-tax) of losses related to the Sept. 11, 2001 attack.
Catastrophe losses reduced income by $0.20 per share in the third quarter of 2002, compared with $0.06 per share in the year-earlier quarter excluding Sept. 11. A loss resulting from a mark-to-market adjustment of Chubb Financial Solutions’ (CFS) portfolio of credit derivatives amounted to $0.15 per share in the 2002 third quarter; in the third quarter a year ago, CFS had breakeven results.
The third quarter net loss including realized investment gains was $242.1 million or $1.42 per share in 2002 and $239.0 million or $1.40 per share in 2001. Realized investment gains per share for the third quarter were $0.17 in 2002 and $0.01 in 2001.
Excluding CFS results, asbestos reserve additions and realized investment gains for both years, and all catastrophes for both years including the Sept. 11 loss last year, the company earned $1.14 per share in the third quarter this year and $1.16 per share last year.
Dean O’Hare, Chairman and CEO of Chubb, noted, “Chubb Commercial Insurance (CCI) had an outstanding quarter despite higher catastrophe losses. CCI continues to benefit from rising rates, improved retention of existing customers and an increase in new customers attracted by Chubb’s superior claim service and broad coverages. Chubb Specialty Insurance (CSI) results suffered increased claim activity in the D&O and E&O lines, but we are securing significant rate increases and better terms and conditions. Chubb Personal Insurance (CPI) was profitable as we continued dealing with water damage and mold issues in the homeowners line. CPI continued to turn in excellent results in the personal automobile, valuable articles and excess liability lines.
“I am especially pleased that we have put the asbestos issue behind us,” continued O’Hare. “Upon completion of our asbestos review, we decided to add $625 million to our reserves. This reflected our independent actuarial consultants’ best estimate of our ultimate asbestos losses. With asbestos behind us, our new CEO, who will be announced soon, will be able to concentrate on taking advantage of a favorable rate environment to enhance the company’s growth and profitability. I expect rates to remain on the upswing through 2004.”
The combined ratio for the third quarter of 2002 was 99.9 percent, excluding the asbestos charge. In the third quarter of 2001, the combined ratio excluding Sept. 11 losses was also 99.9 percent. Catastrophe losses in the third quarter of 2002 were $51.6 million, adding 2.5 percentage points to the combined ratio.
In the third quarter of 2001, catastrophe losses other than those related to the Sept. 11 attack were $14.7 million, representing 0.9 percentage point of the combined ratio. Excluding all catastrophes in both years and the asbestos charge in 2002, the combined ratio for the quarter was 97.4 percent in 2002 and 99.0 percent in 2001.
Net written premium growth of 33 percent in the third quarter, which excludes Sept. 11-related reinstatement premiums in 2001, reflected higher rates, new business and improved retention of existing business in nearly all major lines of business. Premium growth in the U.S. was 35 percent. Premiums outside the U.S. were up about 25 percent.
For the first nine months of 2002, net premiums written increased 30 percent to $6.6 billion from $5.1 billion in 2001, excluding reinsurance reinstatement premiums in 2001. The nine month combined ratio excluding the third quarter asbestos charge in 2002 and the effect of the September 11 attack in 2001 was 98.0 percent in 2002 and 101.1 percent in 2001. Catastrophe losses in the first nine months of 2002 were $75.2 million, adding 1.3 percentage points to the combined ratio.
In the comparable period of 2001, catastrophe losses excluding the Sept. 11 attack were $106.5 million or 2.2 percentage points of the combined ratio. The nine month combined ratio excluding all catastrophes in both years and the third quarter asbestos charge in 2002 was 96.7 percent in 2002 and 98.9 percent in 2001.
Nine month operating income was $117.2 million ($0.68 per share) in 2002 and $74.5 million ($0.42 per share) in 2001. These amounts include the $625 million ($2.34 per share after-tax) third quarter asbestos charge in 2002 and the $645 million ($2.37 per share after-tax) September 11 charge in 2001. Net income for the first nine months was $166.3 million ($0.96 per share) in 2002 and $82.8 million ($0.47 per share) in 2001.
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