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Chubb profit down on catastrophe losses in fourth quarter

Chubb profit down on catastrophe losses in fourth quarter

Chubb Ltd. reported 2017 fourth-quarter net income of $1.53 billion, off 4.8% from the same quarter in 2016 on higher catastrophe losses, the insurer said in its earnings release after markets closed Tuesday.

Pretax catastrophe losses, net of reinsurance and including reinstatement premiums, were $447 million for the quarter, including $320 million for the Northern California wildfires and other catastrophe losses, $157 million for the Southern California wildfires and $30 million of favorable adjustments related to catastrophe loss events in the third quarter, the statement said. This compares with $268 million in such losses in fourth quarter 2016.

The property/casualty combined ratio was 90.7% for the quarter compared with 87.8% in the prior-year period.

Net premiums written for the fourth quarter totaled $7.05 billion, up 1.6% from the year-ago quarter. Property/casualty net premiums written rose 1.7% to $6.5 billion from the year-ago period.

Adjusted net investment income was $873 million for the quarter, up 3.5%, which exceeded prior guidance due to increased call activity in the company’s corporate bond portfolio and higher-than-projected private equity distributions, the statement said.

Net investment income was $797 million, up 7.1% from the fourth quarter of 2016, according to the company’s financial supplement.

Figures for the quarter included a provisional tax benefit of $450 million, related to the 2017 U.S. Tax Cuts and Jobs Act, the statement said.

On the company’s earnings call Wednesday morning, Evan G. Greenberg, Chubb’s chairman and CEO, was bullish on pricing.

“We are seeing, and are reasonably optimistic that we should continue to see, positive momentum building for commercial property/casualty pricing,” Mr. Greenberg said.

In the fourth quarter, positive rate continued from the third quarter and accelerated month on month through the period, and that trend has continued into January, Mr. Greenberg said.

“I believe we are in a transition market globally, and rates should continue to firm as the year goes on,” Mr. Greenberg said. “The current trend in rate change is the best we’ve seen in the last few years.”

In the company’s U.S major account retail and wholesale excess and surplus divisions — “what we call major accounts and specialty,” Mr. Greenberg said — “the change in price we achieved in both major accounts and E&S wholesale was the best we’ve seen in a number of years.”

Major account rates overall were up 1.0% for the quarter, improving to 1.9% in December, Mr. Greenberg said.

Property rates were up over 7.5% for the quarter, improving to 10% by December, he said, while casualty rates were essentially flat in the quarter, improving to 1.5% in December.

In Chubb’s middle-market and small commercial division, net premiums excluding merger-related activities were up 2.0% in the quarter, with property/casualty lines up 3.1%, Mr. Greenberg said.

Overseas, “the trend in pricing again is the best we’ve seen in three years in both our international retail and wholesale businesses,” Mr. Greenberg said, with property-related premiums up 2.0%

For the year ended Dec. 31, 2017, net income was $3.86 billion, down 6.6% from 2016.

The property/casualty combined ratio was 94.7% for the year compared with 88.7% in 2016. In the earnings statement, Mr. Greenberg noted the 2017 figure included $2.70 billion in net catastrophe losses.

Net premiums written in 2017 totaled $29.24 billion, up 3.9% from 2016. Property/casualty premiums written in 2017 totaled $27.10 billion, up 4.2% from 2016.

For the year, total pretax catastrophe loss was $2.75 billion, compared with $1.06 billion in 2016. Adjusted net investment income was $3.5 billion, up 6.1%, according to the earnings statement.


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