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Chubb's Third-Quarter Net Income Up


Posted on 26 Oct 2012 by Neilson

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ChubbThe Chubb Corporation  today reported that net income in the third quarter of 2012 was $533 million compared to $298 million in the third quarter of 2011.  Net income per share increased 90% to $1.98 from $1.04.

Operating income, which the company defines as net income excluding after-tax realized investment gains and losses, was $533 million in the third quarter of 2012 compared to $252 million in the third quarter of 2011.  Operating income per share increased 125% to a record $1.98 from $0.88.

The third quarter impact of catastrophes before tax was $17 million in 2012 and $420 million in 2011.  The impact of catastrophes on third quarter net income and operating income per share was $0.04 in 2012 and $0.95 in 2011.  

The third quarter combined loss and expense ratio was 86.3% in 2012 compared to 102.6% in 2011.  The impact of catastrophes accounted for 0.6 percentage points of the combined ratio in the third quarter of 2012, compared to 14.4 percentage points in the third quarter of 2011.  Excluding the impact of catastrophes, the third quarter combined ratio improved to 85.7% in 2012 from 88.2% in 2011. 

The expense ratio for the third quarter was 32.5% in 2012 and 32.4% in 2011. 

Net written premiums increased 1% in the third quarter of 2012 to $2.9 billion.  Excluding the effect of foreign currency translation, premiums were up approximately 3%.  Premiums increased 4% in the U.S. and declined 6% outside the U.S. (were flat in local currencies).   

Property and casualty investment income after taxes for the third quarter declined 7% to $297 million in 2012 from $321 million in 2011.

Net realized investment losses for the third quarter of 2012 were less than $1 million, compared to net realized investment gains of $71 million before tax ($0.16 per share after-tax) in the third quarter of 2011.

During the third quarter, Chubb repurchased 4.1 million shares of its common stock at a total cost of $301 million (an average of $73.80 per share).  As of September 30, 2012, there remained approximately $357 million available for share repurchases under the current authorization.

Average diluted shares outstanding for the third quarter were 269.2 million in 2012 and 287.8 million in 2011.

"Chubb's third quarter operating earnings per share of $1.98 were the highest of any quarter in Chubb's history," said John D. Finnegan, Chairman, President and Chief Executive Officer.  "This record result reflected strong underlying underwriting performance as well as unusually low catastrophe losses.  All three of our business units made significant contributions to these results, producing an outstanding 86.3% combined ratio.  We're also encouraged by the rate increases we continued to obtain in all of our business units." 

Nine-Month Results

For the first nine months of 2012, net income was $1.4 billion or $5.29 per share, compared with $1.2 billion or $4.16 per share for the first nine months of 2011.  Operating income for the first nine months totaled $1.4 billion or a record $5.04 per share in 2012, compared with $1.0 billion or $3.50 per share in 2011.

The impact of catastrophes in the first nine months of 2012 was $264 million before tax.  In the first nine months of 2011, the impact of catastrophes was $1.0 billion before tax.  The impact of catastrophes on net income and operating income per share for the first nine months was $0.63 in 2012 and $2.25 in 2011.

The combined ratio for the first nine months was 90.1% in 2012 compared to 97.1% in 2011.  The impact of catastrophes in the first nine months accounted for 3.0 percentage points of the combined ratio in 2012 and 11.7 points in 2011.  Excluding the impact of catastrophes, the combined ratio in the first nine months was 87.1% in 2012 and 85.4% in 2011.

The expense ratio for the first nine months was 32.0% in 2012 and 31.8% in 2011.

Net written premiums increased 2% in the first nine months of 2012 to $9.0 billion.  Excluding the effect of foreign currency translation, premiums were up approximately 3%.  Premiums increased 4% in the U.S. and declined 3% outside the U.S. (increased 1% in local currencies). 

Property and casualty investment income after taxes for the first nine months declined 4% to $908 million in 2012 from $949 million in 2011.

Net income for the first nine months of 2012 reflected net realized investment gains of $103 million before tax ($0.25 per share after-tax).  Net income for the first nine months of 2011 reflected net realized investment gains of $300 million before tax ($0.66 per share after-tax). 

Average diluted shares outstanding for the first nine months were 272.9 million in 2012 and 294.4 million in 2011.

During the first nine months of 2012, Chubb repurchased 12.7 million shares of common stock at a total cost of $907 million (an average of $71.23 per share).

Revised Guidance for 2012

"Based on our record operating income per share for the first nine months and our outlook for the fourth quarter," said Mr. Finnegan, "we are increasing our full year 2012 operating income per share guidance to a range of $6.70 to $6.80 from the $5.70 to $5.95 range we provided in July 2012.  This revised guidance is based on operating income per share of $5.04 for the first nine months and an estimated range of $1.66 to $1.76 for the fourth quarter."

The revised guidance for 2012 operating income per share assumes an impact from catastrophes of 2 percentage points in the fourth quarter, resulting in an assumed impact of catastrophes for the year of 2.7 points, compared to an assumption of 4.3 points in the previous guidance.  The revised guidance assumes 271 million average diluted shares outstanding for the year, unchanged from the previous guidance.

The impact of each percentage point of catastrophe losses on 2012 full year operating income per share is approximately $0.28.

Guidance and related assumptions are subject to the risks outlined in the company's forward-looking information safe-harbor statements (see below).

Third Quarter Operations Review

Chubb Personal Insurance (CPI) net written premiums increased 3% in the third quarter of 2012 to $1.1 billion.  CPI's combined ratio was 82.8%, compared to 115.6% in the third quarter of 2011.  The impact of catastrophe losses in the third quarter accounted for 1.5 percentage points of the combined ratio in 2012 and 28.5 points in 2011.  Excluding the impact of catastrophe losses, CPI's third quarter combined ratio was 81.3% in 2012 and 87.1% in 2011.

Net written premiums for Homeowners increased 3%, and the combined ratio was 76.2%.  Personal Automobile net written premiums declined 2%, and the combined ratio was 92.0%.  Other Personal lines premiums increased 8%, and the combined ratio was 95.5%.

Chubb Commercial Insurance (CCI) net written premiums were up 2% in the third quarter of 2012 to $1.2 billion.  The combined ratio for the third quarter was 87.2% in 2012 and 101.1% in 2011.  The impact of catastrophe losses in the third quarter accounted for 0.2 percentage points of the combined ratio in 2012 and 11.2 points in 2011.  Excluding the impact of catastrophe losses, CCI's third quarter combined ratio was 87.0% in 2012 and 89.9% in 2011.

In the U.S., average third quarter CCI renewal rates were up 8%, premium renewal retention was 84% and the ratio of new to lost business was 0.9 to 1.

Chubb Specialty Insurance (CSI) net written premiums declined 4% in the third quarter of 2012 to $640 million.  The combined ratio was 91.9% compared to 88.3% in the third quarter of 2011.

Professional Liability (PL) net written premiums were down 5%, and the business had a combined ratio of 97.0%.  In the U.S., average third quarter PL renewal rates were up 8%, premium renewal retention was 82% and the ratio of new to lost business was 0.6 to 1.

Surety net written premiums were up 3%, and the combined ratio was 55.8%.

Webcast Conference Call to be held Today at 5 P.M.

Chubb's senior management will discuss the company's third quarter performance with investors and analysts today, October 25th, at 5 P.M. Eastern Daylight Time.  The conference call will be webcast live on the Internet at http://www.chubb.com and archived later in the day for replay.

About Chubb


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