Chubb 2nd-Quarter Net Down 3.6% On Catastrophe, Investment Losses

Source: Source: WSJ | Published on July 27, 2012

ChubbChubb Corp.'s second-quarter profit fell 3.6% as the property-and-casualty insurer reported heavy catastrophe losses from U.S. storms and lower investment income.

But net premiums grew, and the company raised its full-year outlook. It now sees operating earnings of $5.70 to $5.95 a share, up from its January view of $5.30 to $5.70, despite higher-than-expected catastrophe losses in the first six months.

Chubb said earlier this month it expected second-quarter catastrophe losses of around $200 million to $240 million before tax, primarily due to severe hail and wind storms in the U.S. Chubb reported Thursday that catastrophe losses reached $223 million before taxes, compared with $329 million in losses in the prior-year period.

Like many U.S. property insurers, Chubb reported mostly weaker core earnings last year as catastrophe losses ballooned after a series of massive disasters, including a rash of destructive tornadoes and damage from Hurricane Irene.

Insurers' investment portfolios have also struggled to make up the disaster costs, as interest rates languish.

At the same time, Chubb has continued to report stronger premium growth as its prices increase.

In the latest quarter, Chubb reported a profit of $404 million, down from $419 million a year earlier. On a per-share basis, earnings rose to $1.48 from $1.42 as the number of shares outstanding fell.

Operating income, which excludes realized investment gains and losses, grew to $1.37 from $1.27 a share, as net premiums written increased 1.5% to $3.1 billion.

Analysts polled by Thomson Reuters expected $1.13 a share on $3.17 billion in net premiums written.

Investment income fell 5.3%, and realized investment gains after tax were down 33%.

The combined loss-and-expense ratio, or portion of premium dollars spent on claims and expenses, improved to 93.8% from 94.9%. Excluding the impact of catastrophes, the combined ratio increased to 86.3% from 83.6%.