Chubb Sees Growth in Q3

October 26, 2004

The Chubb Corporation (NYSE: CB) on Tuesday reported that net income in the third quarter of 2004 was $364.0 million or $1.88 per share, compared to $259.8 million ($1.37 per share) in the third quarter of 2003.

Operating income, which the company defines as net income excluding after-tax realized investment gains and losses, increased to $332.3 million from $220.5 million in the third quarter of 2003. Operating income per share increased 48% to $1.72 from $1.16.

Property and casualty net premiums written in the third quarter of 2004 grew 6% to $3.0 billion. Excluding Chubb Re, premium growth was 8%. U.S. premiums grew 6%. Non-U.S. premiums grew 11%, or 4% in local currencies.

The combined loss and expense ratio for the third quarter was 93.3% in 2004 and 96.6% in 2003. Including $180 million in hurricane losses, catastrophe losses in the 2004 third quarter were $196.1 million, accounting for 6.7 percentage points of the combined ratio, compared to $96.0 million (3.7 points) in the third quarter of 2003. The expense ratio for the third quarter was 29.4% in 2004 and 30.9% in 2003.

For the first nine months of 2004, net income was $1.08 billion or $5.61 per share, compared with $736.5 million or $4.13 per share for the first nine months of 2003. Operating income totaled a record $981.4 million or $5.10 per share for the first nine months of 2004, compared with $680.8 million or $3.82 per share in the first nine months of 2003. Results for the first nine months include an after-tax loss of $11 million or $0.06 per share from Chubb Financial Solutions, compared with a loss of $20 million or $0.11 per share in the first nine months of 2003.

Property and casualty net premiums written in the first nine months of 2004 increased 10% to $9.0 billion. Chubb Re accounted for 1 percentage point of this growth. The combined ratio for the first nine months was 92.9% in 2004 and 95.8% in 2003. Catastrophe losses for the first nine months (excluding the $80 million Sept. 11 reserve release in the second quarter of 2004) were $338.5 million (3.9 percentage points of the combined ratio) in 2004, compared to $261.5 million (3.5 points) in 2003. The expense ratio for the first nine months was 29.7% in 2004 and 30.7% in 2003.

Outlook for 2004

“Chubb had a terrific third quarter despite the severe hurricane season,” said John Finnegan, chairman, president and CEO, “with solid premium growth, excellent underwriting profitability and higher investment income. Going forward, we are continuing to execute our underwriting strategy, control expenses and focus on selectively growing the business in areas that offer the best profit opportunities.

“Each quarter this year has been outstanding, resulting in record earnings for the first nine months,” said Finnegan. “Based on these results and our expectations for the fourth quarter, we are confident that we will achieve our full-year earnings guidance of $6.80 to $7.20 per share. Consistent with our previous guidance, this estimate excludes realized investment gains and losses, excludes Chubb Financial Solutions results and assumes 3 percentage points of catastrophe losses for the year.”

Third quarter operations review

Chubb Personal Insurance (CPI) premiums grew 9% to $754 million. CPI’s combined ratio was 101.2%, compared to 99.9% in the third quarter of 2003. Catastrophe losses in the third quarter accounted for 19.0 percentage points of the combined ratio in 2004 compared to 10.7 percentage points in 2003. Excluding catastrophe losses, CPI’s combined ratio improved 7.0 points to 82.2% from 89.2%.

The homeowners line grew 10%, and the combined ratio was 109.1%, which included 32.1 percentage points of catastrophe losses. Excluding catastrophe losses, the combined ratio was 77.0%. Personal automobile insurance grew 6% and had a combined ratio of 92.5%, while other personal lines, which include valuable articles, excess liability and yacht insurance, grew 12% and had a combined ratio of 88.0%.

Chubb Commercial Insurance (CCI) premiums grew 10% to $1.12 billion. The combined ratio improved to 82.3% from 90.6%. Third quarter catastrophe losses accounted for 3.5 percentage points of the combined ratio in 2004, compared to 2.9 points in 2003.

Average renewal rates in the U.S. increased 2% for CCI, which retained 85% of the U.S. accounts that came up for renewal. In the U.S., premiums from new accounts exceeded lost business by a 1.4-to-1 margin.

Chubb Specialty Insurance (CSI) premiums grew 2% to $1.15 billion. The combined ratio was 99.2%, compared to 100.6% in the third quarter of 2003.

Executive Protection (EP) net written premiums grew 6%, and the business had a combined ratio of 100.3%. Average renewal rates in the U.S. for EP were down 2%, and the renewal retention rate was 89%. In the U.S., premiums from new EP accounts exceeded lost business by a 2-to-1 margin. Financial Institutions (FI) net premiums declined 1% in the third quarter, and the combined ratio was 103.9%. Average renewal rates in the U.S. for FI were up 1%, and the renewal retention rate was 90%. In the U.S., premiums from new FI accounts exceeded lost business by a 2.4-to-1 margin. For the other specialty lines, premiums were down 3% primarily because of a decline in Chubb Re premiums. The combined ratio for the other specialty lines was 95.9%.

Property and casualty investment income after taxes for the third quarter increased 13% to $241.6 million from $213.9 million in 2003. For the first nine months of 2004, property and casualty investment income after taxes increased 12% to $695.8 million from $619.1 million.

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