Posted on 01 Feb 2013 by Neilson
Chubb Corp.'s fourth-quarter earnings declined 77% as hefty costs related to Hurricane Sandy weighed on the property-and-casualty insurer's results.
Still, the company reported an operating profit, while analysts had projected an operating loss for the quarter, and Chubb also provided upbeat earnings guidance for the current year.
Chubb forecast 2013 operating income of $6.40 to $6.80 a share, above the $6.26-a-share estimate from analysts polled by Thomson Reuters.
The company also authorized a new share-repurchase program for up to $1.3 billion of its common stock, a move the company said reflects its strong financial condition.
Chairman and Chief Executive John Finnegan noted that though Hurricane Sandy had a severe impact on the company's latest results, Chubb was able to generate an operating profit due to the "very strong underlying performance" of its business units.
Chubb, which sells business insurance and coverage for high-end homes, recorded higher core earnings in the prior three quarters as its catastrophe losses in 2011 ballooned after a series of massive disasters, including a rash of destructive tornadoes and damage from Hurricane Irene.
The company has an outsized exposure in the U.S. Northeast, which was hit by superstorm Sandy in late October.
The latest quarter's results were hurt by $882 million in costs related to Hurricane Sandy before tax, which was partially offset by the favorable development of reserves for catastrophes that occurred before the fourth quarter. The total impact of catastrophes in the latest period was $2.13 a share after tax, while the year-ago period's impact from catastrophes was three cents a share.
Overall, Chubb reported a profit of $102 million, or 38 cents a share, compared with a year-earlier profit of $452 million, or $1.60 a share, a year earlier. Operating income, which excludes realized investment gains and losses, fell to 16 cents a share from $1.63 a share.
Net premiums written fell 1.9% to $2.91 billion.
Analysts polled by Thomson Reuters had expected a per-share loss of 45 cents and $3.02 billion in net premiums written.
Losses and loss expenses climbed 35% to $2.34 billion.
Investment income slipped 6.6% to $365 million.
The company reported net realized investment gains of $58 million after tax, compared with a realized investment loss of $8 million a year earlier.
The combined loss-and-expense ratio, or portion of premium dollars spent on claims and expenses, deteriorated to 111.2% from 89.9%. Excluding the impact of catastrophes, the combined ratio improved to 81.5% from 89.5% a year earlier.