Chubb Limited reported net income for the quarter of $1.09 billion, compared with $439 million for the same quarter last year. Operating income was $1.17 billion, compared with $1.01 billion, for the same quarter last year.
The insurer’s property/casualty (P&C) combined ratio was 87.5 for the quarter.
“Chubb had a very good quarter,” said Evan G. Greenberg, chairman and chief executive officer, citing strong growth in both underwriting (9 percent) and investment (3 percent) income.
“Our underwriting income growth was driven by combined ratios that were simply excellent in the quarter on both a calendar and accident-year basis in spite of elevated natural catastrophe losses and a one-time reserve charge related to the change in the Ogden discount rate in the U.K. Our underwriting margins are benefiting in particular from expense efficiencies generated from the merger,” Greenberg said in prepared remarks.
“The market is soft and companies are chasing volume in spite of a difficult underwriting environment,” he continued. “Our premium revenue growth was in line with our expectations and benefited from strong business retentions and growth in new business over prior year, which was constrained nonetheless due to competitive P&C conditions globally.”
In a call with analysts, Greenberg said the company is ahead of its schedule on realization of about $800 million in expense savings as a result of the ACE-Chubb marriage and the company would provide an update on those savings at the end of the second quarter.
Other highlights from Chubb’s first quarter results:
- Merger-related underwriting actions, the purchase of additional reinsurance and accounting policy alignment adversely impacted P&C net premiums written growth by $260 million, or 4.1 percentage points in constant dollars.
- Net premiums earned increased 2.6 percent. On an “As If” basis (meaning as if Chubb and ACE were one company for all of the first quarter last year including up to Jan. 14, 2016, the date when the merger was closed)), P&C net premiums earned decreased 3.3 percent. On the same basis, and excluding merger-related underwriting actions, P&C net premiums earned decreased $25 million, or 0.4 percent.
- Total pre-tax and after-tax catastrophe losses for the quarter were $206 million (3.3 percentage points of the combined ratio) and $164 million, respectively, compared with $258 million (4.3 percentage points of the combined ratio) and $204 million, respectively, last year. Greenberg said the lower catastrophe losses were in part a result of Chubb having less concentration than some other insurers in geographies hit by extreme weather.
- Total pre-tax and after-tax favorable prior period development (PPD) for the quarter was $231 million (3.8 percentage points of the combined ratio) and $155 million, respectively, compared with $247 million (4.2 percentage points of the combined ratio) and $198 million last year. PPD in the current quarter included a $41 million charge related to a change in the discount rate in the U.K. (Ogden rate). PPD also included a net favorable adjustment of $79 million related to the 2016 crop year loss estimate compared to the first quarter of 2016, which included a net favorable adjustment of $41 million related to the 2015 crop year loss estimate.
- P&C underwriting income in the first quarter of 2016 was negatively impacted by $64 million of purchase accounting adjustments related to the Chubb Corp. acquisition that will not repeat in 2017 or thereafter.
- Adjusted net investment income, which excludes a purchase accounting adjustment of $91 million, was $836 million for the quarter versus $767 million, or $812 million on an “As If” basis, last year.
- Net loss reserves decreased $153 million in the quarter primarily reflecting seasonality in the company’s crop insurance business and favorable prior period reserve development.
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