Average diluted shares outstanding for the third quarter were 317.3 million in 2010 and 353.5 million in 2009.
Operating income, which the company defines as net income excluding after-tax realized investment gains and losses, was $537 million in the third quarter of 2010 compared to $552 million in the third quarter of 2009. Operating income per share increased 8% to $1.69 from $1.56.
The impact of catastrophes in the third quarter of 2010 was $58 million pre-tax, compared with $22 million pre-tax in the third quarter of 2009. The impact of catastrophes on third quarter net income and operating income per share was $0.12 in 2010 and $0.04 in 2009.
Net written premiums for the third quarter of 2010 were up 1% to $2.7 billion. Foreign currency translation did not have a significant effect on premiums, which were flat in the U.S. and up 6% outside the U.S. (up 4% in local currencies).
The third quarter combined loss and expense ratio was 86.2% in 2010, compared to 85.4% in 2009. The impact of catastrophes in the third quarter of 2010 accounted for 2.1 percentage points of the combined ratio, compared to 0.8 points in the third quarter of 2009. Excluding catastrophes, the combined ratio for the third quarter improved to 84.1% in 2010 from 84.6% in 2009.
The expense ratio for the third quarter was 31.7% in 2010 and 31.2% in 2009.
Property and casualty investment income after taxes for the third quarter was $317 million, unchanged from 2009.
Net income for the third quarter of 2010 reflected net realized investment gains of $54 million pre-tax ($0.11 per share after-tax), compared to $69 million pre-tax ($0.13 per share after-tax) in the third quarter of 2009.
During the third quarter, Chubb repurchased 10.2 million shares of its common stock at a total cost of $555 million (an average cost of $54.63 per share). As of September 30, 2010, there were 6.6 million shares of common stock remaining under the current repurchase authorization.
"In the third quarter, Chubb again demonstrated the ability to generate outstanding profitability and book value growth during a period of challenging economic and industry conditions," said John D. Finnegan, Chairman, President and Chief Executive Officer. "By continuing our focus on the bottom line and maintaining our discipline in risk selection and pricing, all three business units produced excellent results.
"Based on these results for the third quarter and our favorable outlook for the fourth quarter, we are increasing our 2010 full-year operating income per share guidance to a range of $5.75 to $5.85 from the previous guidance range of $5.15 to $5.55. This revised guidance is based on operating income per share of $4.22 in the first nine months and our forecast of a range of $1.53 to $1.63 for the fourth quarter," said Mr. Finnegan.
The revised guidance for 2010 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 5.8 points, compared to the assumption of 7 points in the previous guidance. The revised guidance assumes 322 million average diluted shares outstanding for the year.
Guidance and related assumptions are subject to the risks outlined in the company's forward-looking information safe harbor statement below.
Nine-Month Results
For the first nine months of 2010, net income was $1.6 billion or $4.76 per share, compared with $1.5 billion or $4.18 per share for the first nine months of 2009.
Operating income for the first nine months was $1.4 billion ($4.22 per share) in 2010 and $1.6 billion ($4.49 per share) in 2009.
The impact of catastrophes in the first nine months of 2010 was $595 million pre-tax, compared with $91 million pre-tax in the first nine months of 2009. The impact of catastrophes on net income and operating income per share for the first nine months was $1.19 in 2010 and $0.17 in 2009. The impact of catastrophes includes losses and loss expenses net of reinsurance recoverable and also includes reinsurance reinstatement premiums.
Net written premiums for the first nine months of 2010 increased 1% to $8.4 billion. Excluding the effect of foreign currency translation, premiums were down approximately 1%. Premiums declined 2% in the U.S. and increased 11% outside the U.S. (increased 3% in local currencies).
The combined ratio for the first nine months was 90.1% in 2010, compared to 86.5% in 2009. The impact of catastrophes in the first nine months accounted for 7.1 percentage points of the combined ratio in 2010 and 1.1 points in 2009. Excluding the impact of catastrophes, the combined ratio for the first nine months improved to 83.0% in 2010 from 85.4% in 2009.
The expense ratio for the first nine months was 31.3% in 2010 and 30.7% in 2009.
Property and casualty investment income after taxes for the first nine months increased 1% to $941 million in 2010 from $935 million in 2009.
Net income for the first nine months of 2010 reflects net realized investment gains of $271 million pre-tax ($0.54 per share after-tax). Net income for the first nine months of 2009 reflected net realized investment losses, including impairments, of $170 million pre-tax ($0.31 per share after-tax).
During the first nine months of 2010, Chubb repurchased 29.6 million shares of its common stock at a total cost of $1.5 billion (an average cost of $51.94 per share).
Third Quarter Operations Review
Chubb Personal Insurance (CPI) net written premiums increased 4% in the third quarter of 2010 to $980 million. CPI's combined ratio for the quarter was 85.4%, compared to 81.6% in the third quarter of 2009. The impact of catastrophes in the third quarter of 2010 was 3.7 percentage points. In the third quarter of 2009, the impact of catastrophes improved the combined ratio by 1 percentage point.
Net written premiums for Homeowners increased 2%, and the combined ratio was 81.0%. Personal Automobile net written premiums increased 7%, and the combined ratio was 91.7%. Other Personal lines premiums were up 7%, and the combined ratio was 94.2%.
Chubb Commercial Insurance (CCI) net written premiums in the third quarter were flat at $1.1 billion. CCI's combined ratio for the quarter was 89.1%
in 2010 and 90.5% in 2009. The impact of catastrophes in the third quarter was 2.0 percentage points in 2010 and 2.6 points in 2009.
Average third quarter renewal rates in the U.S. were down 1% for CCI, which retained 87% of the U.S. premiums that came up for renewal. In the U.S., the ratio of new to lost business was 1.2 to 1.
Chubb Specialty Insurance (CSI) net written premiums in the third quarter were flat at $669 million. CSI's combined ratio for the quarter was 83.3%, compared to 83.6% in the third quarter of 2009.
Professional Liability (PL) net written premiums declined 1%, and the business had a combined ratio of 89.3%. Average third quarter renewal rates in the U.S. were down 2% for PL, which retained 88% of the U.S. premiums that came up for renewal. In the U.S., the ratio of new to lost business was 1.1 to 1.
Surety net written premiums increased 7%, and the combined ratio was 40.0%