Chubb profits defy premiums

Chubb beat expectations by announcing net income in the second quarter of 2009 was $551m up from $469m in 2008 despite premium falls across all lines of business.

Q2 Financial highlights (Q2 2008 in brackets)

• Total net written premiums $2.8bn ($3.0bn)
• Net income $551m ($469)
• Net income per share $1.54 ($1.27)
• Operating income, $533m ($518m)
• Operating income per share $1.49 ($1.40)
• Premiums down approximately 3% - down 5% in the US and down 12% outside the US (up 3% in local currencies).
• Combined loss and expense ratio was 85.9% (88.5%)
• Catastrophe losses accounted for 1.5 percentage points of the combined ratio (5.4 percentage points)
• Expense ratio 30.2% (29.8%)
• Property and casualty investment income $312m ($327m).

Six months figures (2008 in brackets)

• Net income $892m ($1.1m)
• Net income per share $2.49 ($3.04)
• Operating income for the first half of 2009 totaled $1.0 billion or $2.92 per share, compared with $1.1 billion or $3.05 per share for the first half of 2008.
• Total net written premiums $5.6bn
• Combined loss and expense ratio 87.0% (86.2%)
• Catastrophe losses accounted for 1.2 percentage points of the combined ratio (3.6 points).
• Expense ratio 30.5% (30.1%)

Superior performance

“Chubb’s excellent results in the second quarter demonstrate our ability to deliver superior performance to our customers and shareholders in a very challenging economic environment,” said John Finnegan, Chairman, President and chief executive officer.

“Chubb performed very well across the board in underwriting, investments and earnings, and this is reflected in our strong return on equity and in the significant increase in our book value per share.

“These results were achieved through our focus on underwriting discipline, our conservative investment philosophy and our strong capital position, all of which continue to differentiate Chubb in the marketplace.

“We also saw a continuation of the positive momentum in commercial and specialty premium rate increases that we have seen in recent quarters.

Revised outlook

“In light of Chubb’s earnings in the first half and our outlook for the rest of the year,” said Mr. Finnegan, “we are increasing our 2009 guidance for operating income per share to a range of $5.20 to $5.50.

"Given our strong capital position and the improved capital market environment, we also intend to accelerate the timing of our share repurchases. We now expect to repurchase by the end of this year all of the 15.7 million shares remaining as of June 30, 2009 under our current share repurchase authorisation.”

Premium falls

• Chubb Personal Insurance (CPI) net written premiums declined 5%
• Net written premiums for homeowners declined 5%,
• Personal automobile net written premiums declined 9%
• Other personal lines premiums declined 2%
• Chubb Commercial Insurance (CCI) net written premiums declined 7%
• Chubb Specialty Insurance (CSI) net written premiums declined 6
• Professional Liability (PL) net written premiums declined 7%
• Surety net written premiums were flat

Anti-AIG jibe

Bloomberg reported that Chubb had mocked the idea that rival carriers (AIG) receive federal aid and said the government’s involvement distorts the marketplace.

“If consumers are unlikely to buy a car built by the government, why on earth would they want to buy an insurance policy underwritten and adjusted by folks who act more like bureaucrats than business people?” Chief operating officer John Degnan asked.

“We will compete vigorously against companies that are unsustainable but for government bailouts.”