Chubb Posts $452M in Q4 Profit, Approves $1.2B Share Buyback

By | January 27, 2012

The Chubb Corporation reported fourth-quarter net income of $452 million, down 27 percent from $620 million net income reported during the same period one year ago.

The Warren, N.J.-based insurer said the results were hurt by catastrophe losses as well as lower investment income. But net written premiums rose compared to one year ago. Net written premiums for the fourth quarter climbed 4 percent to $3.0 billion from $2.9 billion one year ago. Premiums were up 3 percent in the U.S. and up 6 percent outside the U.S. The fourth-quarter combined loss and expense ratio was 89.9 percent, up from 87.0 percent reported one year ago.

The overall underwriting income for the fourth quarter was $284 million, down from $356 million during the year-ago period.

The insurer also announced that its board approved a $1.2 billion share buyback program, which would allow a repurchase of up to 30 million shares. It would represent some 6 percent of the company’s common stock based on current market value. During 2011, Chubb also repurchased 27.6 million shares of its common stock at a cost of $1.7 billion.

Full-year 2011 net income declined to $1.68 billion from $2.17 billion in 2010 because of higher catastrophe losses. The full-year 2011 combined ratio was 95.3 percent, up from 89.3 percent reported during the same period one year ago.

CEO John Finnegan said Chubb had a solid fourth quarter, with a combined ratio of 89.9 percent. “We were very pleased to record $1.7 billion in net income for the year despite unprecedented levels of catastrophe losses. This reflects the strong underlying performance of all three of our business units.”

‘Commercial Rate Environment Continued to Improve’

Also, the company had improved pricing in its standard commercial business, according to CEO Finnegan. “The fourth quarter was especially encouraging as the commercial rate environment continued to improve,” he said.

“We secured an average renewal rate increase of 6 percent in our U.S. standard commercial business, and average renewal rates in our U.S. professional liability business turned positive for the first time in two years. Given our strong balance sheet and underwriting discipline, we are well positioned to take advantage of these improving market conditions.”

Operating income — net income excluding after-tax realized investment gains and losses — came in at $460 million, down from $519 million one year ago.

Property and casualty investment income after taxes for the fourth quarter declined 1 percent to $316 million compared to one year ago when it posted $320 million. The insurer also posted $8 million in realized investment losses, in contrast to a $101 million gain a year ago.

Personal Lines Results

Chubb personal-lines net written premiums increased 3 percent in the fourth quarter to $991 million. Its combined ratio for the quarter was 86.9 percent, up from 83.7 percent during the year-ago period. The impact of catastrophes on the combined ratio in the fourth quarter was 1.6 percentage points in 2011 and 1.0 points in 2010.

Homeowners net written premiums were up 3 percent, and the combined ratio was 82.3 percent. Personal auto net written premiums rose 1 percent, and the combined ratio was 93.3 percent. Other personal lines net written premiums were up 4 percent, and the combined ratio was 94.7 percent.

Commercial Insurance Results

Chubb’s commercial-insurance net written premiums for the fourth quarter were up 8 percent to $1.2 billion. The combined ratio was 93.2 percent in 2011, down slightly from 93.5 percent in 2010. The impact of catastrophes in the fourth quarter improved commercial insurance combined ratio by 0.4 percentage points, thanks to a downward revision of estimated losses from catastrophe events earlier in 2011. In the U.S., average fourth-quarter commercial insurance renewal rates were up 6 percent. The renewal premium retention was 85 percent and the ratio of new to lost business was 1.1 to 1.

Specialty Insurance Results

Chubb’s specialty-insurance net written premiums were down 1 percent in the fourth quarter to $736 million. The combined ratio was 89.8 percent, compared to 82.4 percent reported one year earlier.

Professional liability net written premiums declined 2 percent, with a combined ratio of 96.1 percent. In the U.S., average professional liability renewal rates were up 1 percent, renewal premium retention was 85 percent and the ratio of new to lost business was 0.7 to 1. Surety net written premiums were up 6 percent, and the combined ratio was 47.0 percent.

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