Chubb Reports Q3 Loss Due to Catastrophes; CEO Greenberg Sees Prices Firming

October 27, 2017

Chubb, like other property/casualty insurers and reinsurers, faced significant catastrophe losses from hurricanes and earthquakes that struck in August and September. The insurer reported a net loss of $70 million for the quarter.

The results are a fall from a year ago, when Chubb booked $1.3 billion in net income in the 2016 third quarter.

Pre-tax catastrophe losses were $1.9 billion in the quarter, including $650 million (Harvey), $891 million (Irma), and $220 million (Maria). The insurers also had $25 million in claims from the earthquakes in Mexico and $107 million from other catastrophe losses. After-tax catastrophe losses were $1.5 billion in the quarter.

The operating loss for the past third quarter was $60 million compared with operating income of $1.3 billion in the prior year. Excluding catastrophe losses, Chubb produced $1.46 billion in operating income versus $1.43 billion in the 2016 third quarter.

While it was a tough quarter for CATs, it's the business we're in.

The catastrophes also drove up the property/casualty combined ratio for the quarter to 110.8, compared with 86.0 in 2016. The P/C combined ratio excluding catastrophe losses was 84.7.

The good news was that net investment income set a record at $893 million, up 7.5 percent.

“While it was a tough quarter for CATs, it’s the business we’re in,” Evan G. Greenberg, chairman and CEO of Chubb, said in prepared remarks putting the quarter in perspective. “We experienced a series of significant natural catastrophes, including three hurricanes and two earthquakes, which will likely produce the third $100 billion-plus year for insured catastrophe losses globally for the industry in the last 12 years.”

Greenberg also noted that losses were essentially a quarter of the company’s annual earnings. He added, however, that the results are “within our tolerance for risk and the amount of loss we would expect for these events.”

Greenberg also said he thinks the market is changing.

“I believe we are at the beginning of a firming price environment, driven by years of soft pricing that has resulted in inadequate rates in many classes. The magnitude of this year’s CAT losses, which on a worldwide aggregate basis was between a one-in-five and one-in-10 year industry event, simply adds to the pressure to return to pricing that produces an adequate risk-adjusted return. In that regard, we intend as usual to demonstrate leadership.”

He said Chubb “is in great shape from the perspectives of risk management, growth opportunity and financial efficiency” and is investing in its future even while delivering results to shareholders today.

Of course, Chubb is not alone among P/C insurers in dealing with high catastrophe losses. Insurers and reinsurers are still tallying their third quarter claims.

As Greenberg indicated, there are signs they are ready to raise prices.

For the industry overall, the total insured market losses from the hurricanes and earthquakes could be around $95 billion for the quarter, according to Swiss Re. Swiss Re, the world’s second-largest reinsurer, estimated its own claims burden from Harvey, Irma and Maria in the United States and from two earthquakes in Mexico at roughly $3.6 billion in the third quarter.

The Travelers Companies absorbed $700 million in catastrophe losses for the third quarter yet still reported $293 million in net income.

Zurich Insurance Group has estimated that Hurricanes Harvey, Irma and Maria will aggregate claims in the third quarter of approximately $700 million.

Munich Re has said it expects third quarter catastrophe claims of $3.2 billion that will result in a third quarter loss.

Related:

Was this article valuable?

Here are more articles you may enjoy.