Hurricane, Investment Losses Cut Into Chubb’s Q3 Profit

Like many of its property/casualty competitors, Chubb Corp. saw its third quarter profit cut by investment losses and Hurricane Ike but the New Jersey-based insurer still emerged with $264 million in net income, $300 million in operating income and a combined loss and expense ratio under 100 percent.

Chubb reported that net income in the third quarter of 2008 was $264 million, compared to $738 million in the third quarter of 2007. Net income for the third quarter of 2008 reflected net realized investment losses, including impairments, of $113 million before tax.

Operating income was $338 million, down from $662 million in the third quarter of 2007.

Total net written premiums for the third quarter decreased 1 percent to $2.9 billion. Premiums were down 4 percent in the U.S. and up 8 percent outside the U.S.

The third quarter combined loss and expense ratio was 98.1 percent in 2008, compared to 81.6 percent in 2007. The impact of catastrophes in the third quarter of 2008 accounted for 13.6 percentage points of the combined ratio and was principally related to Hurricane Ike, including Chubb’s estimated share of the assessment from the Texas Windstorm Insurance Association. In the third quarter of 2007, the impact of catastrophes accounted for 2.0 points.

Excluding catastrophe losses, the third quarter combined ratio was 84.5 percent in 2008 and 79.6 percent in 2007. The expense ratio for the third quarter was 30.2 percent in 2008 and 29.8 percent in 2007.

Property and casualty investment income after taxes for the third quarter increased 1 percent to $327 million in 2008 from $324 million in 2007.

“Obviously, losses from Hurricane Ike had a major adverse effect on our third quarter results,” said John D. Finnegan, chairman, president and chief executive officer. “However, despite these substantial catastrophe losses, we were still able to generate over $300 million in operating income, reflecting the continuing underlying strength of all our business units in a challenging environment. In addition, we were especially pleased with the performance of our high-quality investment portfolio in a period of unprecedented financial market turmoil.”

Third Quarter Operations Review
Chubb Personal Insurance (CPI) net written premiums grew 2 percent in the third quarter to $1.0 billion. CPI’s combined ratio for the quarter was 100.7 percent, compared to 83.3 percent in the third quarter of 2007. Catastrophe losses for the quarter accounted for 16.3 percentage points in 2008 and 5.2 points in 2007.

Net written premiums for homeowners declined 2 percent, and the combined ratio was 102.9 percent. Personal automobile insurance net written premiums declined 4 percent, and the combined ratio was 85.7 percent. Other personal lines grew 23 percent and had a combined ratio of 105.8 percent.

Chubb Commercial Insurance (CCI) net written premiums declined 2 percent in the third quarter to $1.2 billion. The combined ratio for the quarter was 106.0 percent in 2008 and 84.4 percent in 2007. Catastrophe losses accounted for 19.9 percentage points in the third quarter of 2008 and 0.8 percentage points in the third quarter of 2007.

Average third quarter renewal rates in the U.S. were down 4 percent for CCI, which retained 86 percent 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.

Chubb Specialty Insurance net written premiums declined 2 percent in the third quarter to $709 million. The combined ratio was 82.3 percent, compared to 76.3 percent in the third quarter of 2007.

Professional Liability net written premiums declined 5 percent, and the business had a combined ratio of 84.3 percent. Average third quarter renewal rates in the U.S. were down 2 percent for professional liability, which retained 87 percent 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 grew 16 percent, and the combined ratio was 65.0 percent.

Nine-Month Results
For the first nine months of 2008, net income was $1.4 billion compared to $2.2 billion for the first nine months of 2007.

Operating income for the first nine months of 2008 totaled $1.5 billion, compared to $1.9 billion in 2007.

Total net written premiums for the first nine months remained flat at $8.9 billion.

The combined loss and expense ratio for the first nine months was 90.2 percent in 2008, compared to 82.6 percent in 2007. The impact of catastrophes in the first nine months of 2008 accounted for 6.9 percentage points of the combined ratio, compared to 2.8 points in the first nine months of 2007. The expense ratio for the first nine months was 30.2 percent in 2008 and 29.9 percent in 2007.

Property and casualty investment income after taxes for the first nine months increased 4% to $981 million in 2008 from $942 million in 2007.

During the first nine months, Chubb repurchased 22,711,788 shares of its common stock at a total cost of $1.1 billion.

Source: Chubb
www.chubb.com