Chubb Reports First Quarter Net Income
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Operating income, which the company defines as net income excluding after-tax realized investment gains and losses, was
The first quarter combined loss and expense ratio was 93.2% in 2014 and 84.6% in 2013. The impact of catastrophes on the first quarter combined ratio was 6.6 percentage points in 2014 and 0.6 points in 2013. Excluding the impact of catastrophes, the first quarter combined ratio was 86.6% in 2014 and 84.0% in 2013. The expense ratio for the first quarter was 32.1% in 2014 and 32.3% in 2013.
Net written premiums for the first quarter of 2014 were
Property and casualty investment income after taxes for the first quarter declined 4% to
Net income for the first quarter of 2014 reflected net realized investment gains of
"
"We remain encouraged by the mid-to-high-single-digit increases in our rate change metrics that we achieved in all of our business units during the first quarter, while enjoying an overall increase in renewal retention," said
During the first quarter of 2014,
Average diluted shares outstanding for the first quarter were 249.2 million in 2014 and 264.8 million in 2013.
Book value per share was
First Quarter Operations Review
Net written premiums for Homeowners increased 4%, and the combined ratio was 104.9%. The impact of catastrophes in the first quarter accounted for 17.9 percentage points of the Homeowners combined ratio. Excluding the impact of catastrophes, the combined ratio for Homeowners was 87.0%. Personal Automobile premiums declined 2%, and the combined ratio was 101.4%. For Other Personal lines, premiums increased 3% and the combined ratio was 92.4%.
In
Professional Liability (PL) net written premiums grew 1%, and the combined ratio was 84.6%. In
Surety net written premiums were down 13%, and the combined ratio was 122.9% driven by one large loss.
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All financial results in this release and attachments are unaudited.
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Definitions of Key Terms
Operating Income:
Operating income, a non-GAAP financial measure, is net income excluding after-tax realized investment gains and losses. Management uses operating income, among other measures, to evaluate its performance because the realization of investment gains and losses in any given period is largely discretionary as to timing and can fluctuate significantly, which could distort the analysis of trends.
Underwriting Income (Loss):
Management evaluates underwriting results separately from investment results. The underwriting operations consist of four separate business units: personal insurance, commercial insurance, specialty insurance and reinsurance assumed. Performance of the business units is measured based on statutory underwriting results. Statutory accounting principles applicable to property and casualty insurance companies differ in certain respects from generally accepted accounting principles (GAAP). Under statutory accounting principles, policy acquisition and other underwriting expenses are recognized immediately, not at the time premiums are earned. Statutory underwriting income (loss) is arrived at by reducing premiums earned by losses and loss expenses incurred and statutory underwriting expenses incurred.
Management uses underwriting results determined in accordance with GAAP, among other measures, to assess the overall performance of the underwriting operations. To convert statutory underwriting results to a GAAP basis, certain policy acquisition expenses are deferred and amortized over the period in which the related premiums are earned. Underwriting income (loss) determined in accordance with GAAP is defined as premiums earned less losses and loss expenses incurred and GAAP underwriting expenses incurred.
Property and Casualty Investment Income After Income Tax:
Management uses property and casualty investment income after income tax, a non-GAAP financial measure, to evaluate its investment results because it reflects the impact of any change in the proportion of tax exempt investment income to total investment income and is therefore more meaningful for analysis purposes than investment income before income tax.
Book Value per Common Share with Available-for-Sale Fixed Maturities at Amortized Cost:
Book value per common share represents the portion of consolidated shareholders' equity attributable to one share of common stock outstanding as of the balance sheet date. Consolidated shareholders' equity includes, as part of accumulated other comprehensive income (loss), the after-tax appreciation or depreciation, including unrealized other-than-temporary impairment losses, of the Corporation's available-for-sale fixed maturities, which are carried at fair value. The appreciation or depreciation of available-for-sale fixed maturities is subject to fluctuation due to changes in interest rates and therefore could distort the analysis of trends. Management believes that book value per common share with available-for-sale fixed maturities at amortized cost, a non-GAAP financial measure, is an important measure of the underlying equity attributable to one share of common stock.
Combined Loss and Expense Ratio or Combined Ratio:
The combined loss and expense ratio, expressed as a percentage, is the key measure of underwriting profitability. Management uses the combined loss and expense ratio calculated in accordance with statutory accounting principles applicable to property and casualty insurance companies to evaluate the performance of the underwriting operations. It is the sum of the ratio of losses and loss expenses to premiums earned (loss ratio) plus the ratio of statutory underwriting expenses to premiums written (expense ratio) after reducing both premium amounts by dividends to policyholders.
Net Written Premiums Growth (Decrease) Excluding the Impact of Foreign Currency Translation:
Management uses net written premiums growth (decrease) excluding the impact of foreign currency translation, a non-GAAP financial measure, to evaluate the trends in net written premiums, exclusive of the effect of fluctuations in exchange rates between the U.S. dollar and the currencies in which international business is transacted. The impact of foreign currency translation is excluded as exchange rates may fluctuate significantly and the effect of fluctuations could distort the analysis of trends. When excluding the impact of foreign currency translation, management uses the same exchange rate to translate each foreign currency denominated net written premium amount in both periods.
FORWARD-LOOKING INFORMATION
In the conference call identified above and other communications, we may make statements regarding our results of operations, financial condition and other matters that are "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995 (PSLRA). These forward-looking statements are made pursuant to the safe harbor provisions of the PSLRA. Forward-looking statements frequently can be identified by words such as "believe," "expect," "anticipate," "intend," "plan," "will," "may," "should," "could," "would," "likely," "estimate," "predict," "potential," "continue," or other similar expressions. Forward-looking statements are made based upon management's current expectations and beliefs concerning trends and future developments and their potential effects on
- global political, economic and market conditions, particularly in the jurisdictions in which we operate and/or invest, including:
- changes in credit ratings, interest rates, market credit spreads and the performance of the financial markets;
- currency fluctuations;
- the effects of inflation;
- changes in domestic and foreign laws, regulations and taxes;
- changes in competition and pricing environments;
- regional or general changes in asset valuations;
- the inability to reinsure certain risks economically; and
- changes in the litigation environment;
- the effects of the outbreak or escalation of war or hostilities;
- the occurrence of terrorist attacks, including any nuclear, biological, chemical or radiological events;
- premium pricing and profitability or growth estimates overall or by lines of business or geographic area, and related expectations with respect to the timing and terms of any required regulatory approvals;
- adverse changes in loss cost trends;
- our ability to retain existing business and attract new business at acceptable rates;
- our expectations with respect to cash flow and investment income and with respect to other income;
- the adequacy of our loss reserves, including:
- our expectations relating to reinsurance recoverables;
- the willingness of parties, including us, to settle disputes;
- developments in judicial decisions or regulatory or legislative actions relating to coverage and liability, in particular, for asbestos, toxic waste and other mass tort claims;
- development of new theories of liability;
- our estimates relating to ultimate asbestos liabilities; and
- the impact from the bankruptcy protection sought by various asbestos producers and other related businesses;
- the availability and cost of reinsurance coverage;
- the occurrence of significant weather-related or other natural or human-made disasters, particularly in locations where we have concentrations of risk or changes to our estimates (or the assessments of rating agencies and other third parties) of our potential exposure to such events;
- the impact of economic factors on companies on whose behalf we have issued surety bonds, and in particular, on those companies that file for bankruptcy or otherwise experience deterioration in creditworthiness;
- the effects of disclosures by, and investigations of, companies we insure, particularly with respect to our lines of business that have a longer time span, or tail, between the incidence of a loss and the settlement of the claim;
- the impact of legislative, regulatory, judicial and similar developments on companies we insure, particularly with respect to our longer tail lines of business;
- the impact of legislative, regulatory, judicial and similar developments on our business, including those relating to insurance industry reform, terrorism, catastrophes, the financial markets, solvency standards, capital requirements, accounting guidance and taxation;
- any downgrade in our claims-paying, financial strength or other credit ratings;
- the ability of our subsidiaries to pay us dividends;
- our plans to repurchase shares of our common stock, including as a result of changes in:
- our financial position and financial results;
- our capital position and/or capital adequacy levels required to maintain our existing ratings from independent rating agencies;
- our share price;
- investment opportunities;
- opportunities to profitably grow our property and casualty insurance business; and
- corporate and regulatory requirements; and
- our ability to implement management's strategic plans and initiatives.
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SUPPLEMENTARY FINANCIAL DATA |
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(Unaudited) |
|||
Three Months Ended March 31 |
|||
2014 |
2013 |
||
(in millions) |
|||
PROPERTY AND CASUALTY INSURANCE |
|||
Underwriting |
|||
Net Premiums Written |
|
|
|
Increase in Unearned Premiums |
(33) |
(53) |
|
Premiums Earned |
3,029 |
3,004 |
|
Losses and Loss Expenses |
1,845 |
1,568 |
|
Operating Costs and Expenses |
979 |
983 |
|
Increase in Deferred Policy Acquisition Costs |
(13) |
(41) |
|
Dividends to Policyholders |
10 |
9 |
|
Underwriting Income |
208 |
485 |
|
Investments |
|||
Investment Income Before Expenses |
351 |
363 |
|
Investment Expenses |
10 |
12 |
|
Investment Income |
341 |
351 |
|
Other Income (Charges) |
(2) |
5 |
|
Property and Casualty Income |
547 |
841 |
|
CORPORATE AND OTHER |
(60) |
(63) |
|
CONSOLIDATED OPERATING INCOME BEFORE INCOME TAX |
487 |
778 |
|
Federal and Foreign Income Tax |
113 |
212 |
|
CONSOLIDATED OPERATING INCOME |
374 |
566 |
|
REALIZED INVESTMENT GAINS AFTER INCOME TAX |
75 |
90 |
|
CONSOLIDATED NET INCOME |
$ 449 |
$ 656 |
|
PROPERTY AND CASUALTY INVESTMENT INCOME AFTER INCOME TAX |
$ 277 |
$ 288 |
|
Three Months Ended March 31 |
|||
2014 |
2013 |
||
OUTSTANDING SHARE DATA |
|||
(in millions) |
|||
Average Common and Potentially Dilutive Shares |
249.2 |
264.8 |
|
Actual Common Shares at End of Period |
244.5 |
259.2 |
|
DILUTED EARNINGS PER SHARE DATA |
|||
Operating Income |
|
|
|
Realized Investment Gains |
.30 |
.34 |
|
Net Income |
|
|
|
Effect of Catastrophes |
|
|
|
2014 |
Dec. 31 2013 |
2013 |
|
BOOK VALUE PER COMMON SHARE |
|
|
|
BOOK VALUE PER COMMON SHARE, |
|||
with Available-for-Sale Fixed Maturities |
|||
at Amortized Cost |
62.39 |
61.86 |
55.57 |
PROPERTY AND CASUALTY UNDERWRITING RATIOS THREE MONTHS ENDED |
||
2014 |
2013 |
|
Losses and Loss Expenses to Premiums Earned |
61.1% |
52.3% |
Underwriting Expenses to Premiums Written |
32.1 |
32.3 |
Combined Loss and Expense Ratio |
93.2% |
84.6% |
Effect of Catastrophes on Combined Loss and Expense Ratio |
6.6% |
0.6% |
PROPERTY AND CASUALTY LOSSES AND LOSS EXPENSES COMPONENTS THREE MONTHS ENDED |
||
2014 |
2013 |
|
(in millions) |
||
Paid Losses and Loss Expenses |
|
|
Increase (Decrease) in Unpaid Losses and Loss Expenses |
51 |
(270) |
Total Losses and Loss Expenses |
|
|
PROPERTY AND CASUALTY PRODUCT MIX |
|||||
THREE MONTHS ENDED |
|||||
Net Premiums Written |
Combined Loss and |
||||
2014 |
2013 |
% Increase (Decrease) |
Expense Ratios 2014 2013 |
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(in millions) |
|||||
|
|||||
Automobile |
$ 173 |
$ 176 |
(2)% |
101.4% |
94.0% |
Homeowners |
592 |
570 |
4 |
104.9 |
82.5 |
Other |
248 |
241 |
3 |
92.4 |
94.0 |
Total Personal |
1,013 |
987 |
3 |
101.8 |
87.0 |
|
|||||
Multiple Peril |
261 |
272 |
(4) |
91.8 |
83.4 |
Casualty |
446 |
448 |
- |
89.7 |
93.2 |
Workers' Compensation |
310 |
299 |
4 |
84.0 |
89.0 |
Property and Marine |
408 |
421 |
(3) |
89.1 |
64.7 |
Total Commercial |
1,425 |
1,440 |
(1) |
88.5 |
81.9 |
|
|||||
Professional Liability |
552 |
549 |
1 |
84.6 |
92.4 |
Surety |
72 |
83 |
(13) |
122.9 |
50.7 |
Total Specialty |
624 |
632 |
(1) |
88.9 |
87.4 |
|
3,062 |
3,059 |
- |
93.2 |
84.7 |
Reinsurance Assumed |
- |
(2) |
* |
* |
* |
Total |
|
|
- |
93.2 |
84.6 |
* The change in net premiums written and the combined loss and expense ratios are no longer presented for the Reinsurance Assumed business since it is in runoff.
SOURCE
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