Chubb profit down slightly in wake of catastrophe losses

Chubb Ltd. reported first-quarter 2018 net income of $1.08 billion, the company said in a statement Tuesday after markets closed, off just 1% from the first quarter of 2017 as natural catastrophe losses took a toll on earnings, which were buoyed by better rates.

Net premiums written rose 5.9% to $7.10 billion while property/casualty net premiums written rose 5.8% to $6.55 billion.

Net investment income rose 8.2% to $806 million and the company’s property/casualty combined ratio worsened a bit to 90.1% from 87.5% a year ago.

On the company’s Wednesday morning call with analysts, Evan G. Greenberg, Chubb’s chairman and CEO, struck an upbeat tone.

“Fundamentally, most all of our businesses we are achieving a rate adequacy,” Mr. Greenberg said on the company’s Wednesday morning earnings call. “Some have better adequacy than others,” he said, adding that “our business are earning an underwriting profit.”

One area of business not earning its keep has been the company’s London market presence.

“We’ve over the last number of years shrunk our presence in the London market,” Mr. Greenberg said, because business “can’t earn an adequate return.”

Mr. Greenberg compared the London market to a tavern full of patrons wont to reform but without the will. “You hear all the chatter, and it’s in their own hands to get out of their own way and do the most fundamental: underwrite the business to an adequate risk-adjusted return and deploy the capital on that basis.”

Mr. Greenberg said catastrophe losses for the quarter were $175 million and contributed 5.8 points to the company’s property/casualty combined ratio, noting the mudslide in Montecito, California.

More than one analyst engaged Mr. Greenberg about mergers and acquisitions.

“Like many other asset classes, P&C assets are currently pricey and at current prices don’t generally make a lot of sense,” Mr. Greenberg told analysts when questioned about mergers. “Prices paid for recent transactions may make sense to others, but they don’t for us.”

Mr. Greenberg noted that recent prices to book are above what Ace Ltd. paid for Chubb Corp. in 2016, “but look at the quality of the assets.”

Mr. Greenberg was pressed if Chubb was ready for another acquisition in the shadow of having integrated Ace.

He replied that “Chubb is ready, but it’s hardly my priority to distract the organization from doing what it does best,” adding opportunity remains “awesome … if this organization never does another acquisition.”

“We’re at that point in the cycle. We’re happy to rest. We’re patient long-term builders and investors,” Mr. Greenberg said. “Money does not burn a hole in our pocket.”