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Chubb 4Q Profits Soar on Investments While Premiums Fall on Weak Economy

Source: Bestwire Services

Posted on 28 Jan 2011

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Fourth-quarter net income rose more than 70% for Chubb Corp. as it recorded net realized investment gains of $193 million, compared with a net investment loss of $250 million during the same period a year prior.

Chubb said it logged a $695 million profit during the last three months of 2009, compared with $407 million at the same time in 2008. On a net income basis, the company recorded a return on equity of 18%, said Chairman, President and Chief Executive Officer John D. Finnegan, during a conference call. Operating income per share for 2009 of $6.14 was the second-highest in Chubb's history, he said.

Finnegan said due to "lower exposures that have resulted from a decline in economic activity," net premiums for the fourth quarter were down 4% to $2.8 billion. Premiums were down 8% in the United States and up 9% outside the United States, Chubb said.

Chief Operating Officer John Degnan said exposures were down in all three of Chubb's lines of business -- personal, commercial and specialty insurance. Chubb believes much of the industry is experiencing the same thing, and although some signs of recovery might have been observed at the end of 2009, "it will be a while before economic conditions are significantly robust to generate premium growth, which is likely to lag an economic recovery," he said.

"New business is hard to come by, as some of our competitors appear to be willing to underprice new business with the expectations they'll return to rate adequacy when a hardening market permits it," said Degnan. "That's a game that can have a bad ending, and it's a game we won't play."

Degnan said reductions in the purchase of new homes, automobiles, yachts, jewelry and fine arts continue to hurt premium growth. Homeowners net premiums written fell 4%, while auto premiums increased 3%, driven by growth outside the United States, said Degnan. Personal lines net premiums written dropped 3% to $907 million.

Commercial lines net premiums written were down 6% to $1.1 billion. Degnan said workers' compensation was down 18%, as renewal exposures were "down significantly" due to lower payrolls.

For the year Chubb posted an 84.1 combined ratio, compared with 87.1 in 2008 in personal lines; an 89.9 combined ratio, compared with 93.9 in commercial lines; and an 84.1 combined ratio, compared with 83.3 in specialty lines.

Chubb Group of Insurance Cos. currently has a Best's Financial Strength Rating of A++ (Superior).