Key Highlights

  • Core operating EPS of USD 7.66 beat the USD 6.77 estimate.
  • Revenue of USD 15.14 billion missed the USD 15.71 billion estimate.
  • Catastrophe losses rose to USD 705 million from USD 285 million.
  • Net investment income hit a record USD 1.79 billion, up 8.6%.

Chubb (NYSE:CB) reported third-quarter results on Oct. 20, with core operating income of USD 7.66 per share against a consensus estimate of USD 6.77. Revenue of USD 15.14 billion fell short of the USD 15.71 billion estimate, a 3.58% miss.

Net income was USD 2.84 billion, or USD 7.30 per share, up 4.4% per share from a year earlier. Chubb is a Zurich-based multiline insurer and reinsurer that operates in 54 countries and territories, and management holds its call at 8:30 a.m. ET on Wednesday.

Catastrophe losses reset the comparison

Pre-tax net catastrophe losses reached USD 705 million, compared with USD 285 million a year earlier. The property and casualty combined ratio was 84.1%, up from 81.8%, and underwriting income was USD 2.06 billion, down 8.8%. Excluding catastrophes, current accident year underwriting income rose 3.3% to USD 2.26 billion, with a combined ratio of 82.6% versus 82.5%.

Favorable prior period development was USD 511 million, versus USD 361 million a year earlier. Core operating income fell 2.2% to USD 2.98 billion, while per-share core income rose 0.8%. Chief Executive Officer Evan Greenberg said catastrophe losses were particularly light a year ago, and pointed to record nine-month core operating income of USD 8.6 billion, up 21%.

Premiums and investment income

Consolidated net premiums written were USD 15.14 billion, up 1.9%, with property and casualty at USD 13.18 billion, also up 1.9%. North America Commercial fell 2.7%, or rose 1.7% excluding large account property and financial lines exposure changes, including added reinsurance. North America Personal grew 5.3%, North America Agriculture 5.1% and Overseas General 6.7%.

Life Insurance premiums written were USD 1.96 billion, up 1.4%, and segment income rose 11.4% to USD 369 million. Pre-tax net investment income reached a record USD 1.79 billion, up 8.6%, and adjusted net investment income was USD 1.89 billion, up 6.3%. Operating cash flow was a record USD 6.07 billion.

The chief executive said commercial property and casualty markets are growing more competitive, particularly in the U.S. and London, and said he sees North America Commercial growth improving in coming quarters.

Book value and capital return

Book value per share was USD 191.43, up 5.1% from a year earlier, and tangible book value per share was USD 126.96, up 5.7%. The quarter included after-tax net realized and unrealized investment losses of USD 4.48 billion, partly offset by USD 551 million of foreign currency gains.

Chubb returned USD 1.57 billion to shareholders, made up of USD 1.18 billion of share repurchases at an average price of USD 344.32 and USD 393 million of dividends. Annualized return on equity was 15.3%, versus 15.9% a year ago, and core operating return on tangible equity was 21.6%, versus 24.8%.

Loss trends and pricing markers to watch

Catastrophe loss trends are the first item to follow, given the USD 705 million quarterly figure. Others include North America Commercial premium growth, pricing in the U.S. and London, adjusted net investment income as rates move, and the path of book value per share. The Wednesday call is the next occasion for management to address these.