Chubb Q1 Profit Rises 30% to $656M; CEO Says ‘Market Remains Firm’

April 26, 2013

Chubb Corp. reported on Thursday $656 million net income for its 2013 first quarter, an increase of 29.6 percent compared to $506 million income reported during the first quarter of 2012.

The insurer of businesses and high-end homes said its bottom line benefited from higher rates, strong underlying underwriting performance and low catastrophe losses.

Operating income, which the company defines as net income excluding after-tax realized investment gains and losses, was $566 million for the 2013 first quarter, up 20.7 percent from $469 million one year ago.

Net written premiums for the 2013 first quarter was $3.057 billion, up 3.7 percent from $2.949 billion reported during the first quarter of 2012.

2013 Q1 Combined Ratio Improves to 84.6%

The 2013 first quarter combined ratio was 84.6 percent, improving 5.6 percentage points from 90.2 percent one year ago.

The impact of catastrophes on the 2013 first quarter combined ratio was 0.6 percentage points, compared to 0.8 points a year ago. Excluding the impact of catastrophes, the 2013 first quarter combined ratio was 84.0 percent, compared to 89.4 percent a year ago. The expense ratio for the 2013 first quarter was 32.3 percent compared to 32.2 percent a year ago.

Property and casualty investment income after taxes for the 2013 first quarter declined 6 percent to $288 million, compared to $308 million during the first quarter of 2012.

The company said the 2013 first quarter net income included net realized investment gains of $138 million before tax, compared to $56 million for the first quarter of 2012.

“As you can see from the earnings release, Chubb had a great first quarter,” CEO John Finnegan said during Thursday’s earnings conference call. “We recorded the highest operating income per share and the highest net income per share of any quarter in the company’s history.”

“The first quarter was highlighted by strong underlying performance in each of our business units and relatively benign catastrophe losses. We are also very pleased that the positive rate momentum we have seen in recent quarters has continued,” Finnegan said.

Finnegan said the 4 percent year-over-year increase in net written premiums was driven by growth in all three of Chubb’s business units.

In terms of pricing, he said, average renewal rates increased in both U.S. commercial and specialty lines by “high single digits” in the first quarter, which is consistent with the rate increases Chubb saw in the second half of 2012.

‘We Will See Continued Margin Expansion’

“We also had continued rate improvement in personal lines,” he added. “We continue to push for rate as we focus on improving the profitability of our business in the face of low interest rates and the higher catastrophe losses that the industry has experienced over past several years.”

Commenting on the current environment, Finnegan said “the market remains firm” as evidenced by the fact that the company continued in its latest quarter to achieve mid- to high-single digit renewal increases on all business units, with stable retention levels.

“Going forward — assuming we achieve rate increases at current levels — we will see continued margin expansion,” he said.

The following are the 2013 first quarter overview of Chubb’s main business units:

• Chubb Personal Insurance (CPI) net written premiums increased 5 percent in the first quarter to $987 million. CPI’s combined ratio for the quarter was 87.0 percent, compared to 85.5 percent in the first quarter of 2012. The first-quarter impact of catastrophes accounted for 3.9 percentage points in 2013, including a 2.6 point impact related to an increase in estimated CPI losses from Superstorm Sandy. In the first quarter of 2012, the impact of catastrophes was 1.2 points.

Net written premiums for Homeowners increased 3 percent, and the combined ratio was 82.5 percent. The impact of catastrophes in the first quarter accounted for 6.1 percentage points of the Homeowners combined ratio. Excluding the impact of catastrophes, the combined ratio for Homeowners was 76.4 percent. Personal Automobile premiums increased 7 percent, and the combined ratio was 94.0 percent. For Other Personal lines, premiums increased 9 percent and the combined ratio was 94.0 percent.

• Chubb Commercial Insurance (CCI) net written premiums increased 2 percent in the 2013 first quarter to $1.4 billion. The combined ratio for the quarter was 81.9 percent in 2013 and 93.3 percent in 2012. The impact of catastrophes in the first quarter of 2013 improved CCI’s combined ratio by 1.7 percentage points as a result of a 2.1 point impact related to a decrease in estimated CCI losses from Superstorm Sandy. In the first quarter of 2012, the impact of catastrophes accounted for 0.9 percentage points of CCI’s combined ratio.

In the United States, average first quarter CCI renewal rates increased 8 percent, renewal premium retention was 84 percent and the ratio of new to lost business was 0.8 to 1.

The company added that CCI saw average renewal increases in the U.S. in every line of business, led by workers’ comp and general liability, which were in the “low double digits.” They were followed by monoline property, package, auto and excess/umbrella, all of which were in the “mid-to-high single digits.”

• Chubb Specialty Insurance (CSI) net written premiums increased 5 percent in the first quarter to $632 million. The combined ratio for CSI was 87.4 percent, compared to 93.6 percent in the first quarter of 2012.

Professional Liability (PL) net written premiums were up 2 percent, and the combined ratio was 92.4 percent. In the United States, average first quarter renewal rates for PL increased 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 up 30 percent, and the combined ratio was 50.7 percent.

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