Chubb Records Solid Q4 and Year Despite Catastrophe Losses

January 31, 2018

Chubb had a solid last quarter of 2017 and year even though challenged by wildfire and other catastrophe costs. Fourth quarter results were enhanced by a one-time gain from the Trump tax cuts.

The insurer booked $1.5 billion in net income for the 2017 fourth quarter, down from $1.6 billion over the same quarter a year ago. Full-year net income was $3.9 billion, including after-tax catastrophe losses of $2.2 billion. Catastrophe losses came from California wildfires, and at least three hurricanes that hit in the second half of 2017.

Chubb’s fourth-quarter property/casualty combined ratio was at 90.7, compared to 87.8 over the fourth quarter of 2016. The full-year P/C combined ratio was 94.7 compared to 88.7 the prior year.

The commercial lines combined ratio for the quarter was 86.2 compared to 84.8 in last year’s fourth quarter. For the year, it was 91.4 compared to 86.7 in 2016. The personal lines combined ratio for the fourth quarter was 80.5 compared to 82. 9 or last year’s fourth quarter. For the year, it was 100.7 compared to 90.0 for 2016.

“Those combined ratios, given what was likely a record or near-record year for worldwide insured natural catastrophe losses, demonstrate the quality of our underwriting and our balanced book of business,” said Chubb Chairman and Chief Executive Officer Evan Greenberg in prepared remarks.

Pre-tax catastrophe losses, net of reinsurance, were $447 million for the quarter, including $320 million for the northern California wildfires and other catastrophe losses, $157 million for the southern California wildfires and $30 million of favorable adjustments related to catastrophe loss events in the third quarter.

Consolidated and P/C net premiums written were $7.1 billion and $6.5 billion, respectively, for the quarter, and $29.2 billion, and $27.1 billion, respectively, for the year. Excluding merger-related costs, P/C net premiums written were up 3.7 percent for the quarter and 6.3 percent for the year.

Greenberg noted that the insurer profited from improved commercial lines property/casualty pricing.

“In terms of the current rate environment, positive commercial P/C rate movement accelerated in the quarter month by month, with prices firming in a number of important classes, both property and casualty-related. We achieved some of the best rate change in a number of years and the positive trend has continued into January with momentum appearing to build in certain classes,” Greenberg said.

Chubb realized a one-time gain in book value gain of $450 million from the 2017 tax reform law, which also decreased tangible book value by $293 million, primarily due to the reduced U.S. corporate tax rate on deferred tax balances and excess foreign tax credits created by the deemed repatriation of foreign subsidiary earnings.

Greenberg said the company is making a $50 million contribution to the Chubb Charitable Foundation with some of the gains from the tax law.

Adjusted net investment income was $873 million pretax for the quarter, and a record $3.5 billion pretax for the year, up 3.5 percent and 6.1 percent, respectively, over the same period a year ago.

Greenberg said the costs from the ACE/Chubb merger in 2017 are largely behind Chubb now.

“With merger-related underwriting actions and their impact on revenue growth largely behind us, a strong economy, both domestic and global, and positive momentum continuing to build for commercial P/C pricing in a number of classes, we are quite optimistic about our prospects for improved premium revenue growth in the year ahead,” Greenberg said.

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