Thursday, property and casualty insurance provider Chubb Corp. (CB), said its profit for the second quarter increased from last year, helped by an increase in operating income, notwithstanding a 7% decline in total net written premiums. Chubb revised its full year forecast, lifting its operating earnings outlook for fiscal 2009.
In another development, Chubb's Board of Directors, at a meeting held on July 21, determined to extend for one year the mandatory retirement date for its vice chairman and chief operating officer, John Degnan. As a result, Degnan will be retiring from Chubb on December 31, 2010.
The Warren, New Jersey based company's second quarter net income was $551 million or $1.54 per share, compared to $469 million or $1.27 per share in the same quarter last year.
Result for the quarter included net realized investment gains of $18 million or $0.05 per share after-tax, compared to net realized investment losses of $49 million or $0.13 per share after-tax in the previous year quarter.
Operating income, defined as net income excluding after-tax realized investment gains and losses, rose to $533 million or $1.49 per share from $518 million or $1.40 per share in the year-ago quarter.
On average, twenty analysts surveyed by Thomson Reuters expected the company to report earnings of $1.31 per share for the second quarter. Analysts' estimates typically exclude special items.
Net premiums written for the quarter declined 7% to $2.85 billion from $3.05 billion in the comparable quarter last year. Premiums, excluding the effect of foreign currency translation, were down about 3%. Premiums decreased 5% in the U.S. and premiums written outside the US fell 12%, while it increased 3% in local currencies.
Premiums earned in the quarter were $2.83 billion, down from $2.99 billion in the corresponding period last year.
Losses and loss expenses for the quarter decreased to $1.57 billion from $1.75 billion last year. Operating costs and expenses declined to $857 million from $904 million in the year-ago quarter.
Property and casualty income for the quarter was $784 million, up from $757 million in the previous year period. Property and casualty investment income after taxes for the second quarter dropped 5% to $312 million from $327 million a year earlier.
Quarterly combined loss and expense ratio was 85.9%, down from 88.5% in the second quarter of 2008. Catastrophe losses for the second quarter accounted for 1.5 percentage points of the combined ratio, compared to 5.4 points losses in the prior year period. Expense ratio for the second quarter was 30.2% in 2009 and 29.8% in 2008.
Segment-wise, Chubb Personal Insurance net written premiums for the quarter declined 5% to $961 million from $1.02 billion last year. Combined ratio for the quarter grew to 84.2% from 81.9% in the second quarter of 2008. Catastrophe losses during the quarter accounted for 3.2 percentage points in the latest quarter.
Personal Insurance included net written premiums for Homeowners that decreased 5%, with a combined ratio of 80.7%. Personal Automobile net written premiums declined 9%, with a combined ratio of 90.5%. Other personal lines declined 2% with a combined ratio of 90.7%.
Chubb Commercial Insurance net written premiums for the quarter declined 7% to $1.21 billion from $1.30 billion in the prior year quarter. Combined ratio for the second quarter was 89.2% in 2009, while it was 93.7% in 2008. For the second quarter, Catastrophe losses accounted for 1.2 percentage points, compared to 9.2 percentage points a year-ago.
Chubb Specialty Insurance net written premiums declined 6% in the second quarter to $669 million from $711 million in the year-ago quarter. Combined ratio was 83.9%, compared to 89.3% in the previous year quarter. Professional Liability net written premiums declined 7%, with a combined ratio of 90.1%. Surety net written premiums were flat, and the combined ratio was 38.5%.
During the second quarter of 2009, Chubb repurchased 2.31 million shares of its common stock at a total cost of $90 million. As of June 30, 2009, there were 15.67 million shares of common stock remaining under the current repurchase authorization.
Given strong capital position and the improved capital market environment, Chubb said it intends to accelerate the timing of its share repurchases. Chubb now expects to repurchase by the end of this year all of the 15.7 million shares remaining as of June 30, 2009 under its current share repurchase authorization.
For the six-month 2009, Chubb reported net income of $892 million or $2.49 per share, down from $1.13 billion or $3.04 per share in the previous year. Operating income declined to $1.05 billion or $2.92 per share from $1.14 billion or $3.05 per share in the prior year.
Total net written premiums for the first half declined 7% to $5.59 billion from $5.98 billion in the comparable period last year. Premiums earned was $5.65 billion, down from $5.96 billion a year ago.
Excluding the effect of foreign currency translation, premiums were down about 3% in the first half of 2009. Premiums declined 5% in the U.S. and declined 12% outside the U.S., while premiums increased 4% in local currencies.
Looking ahead into the full year 2009, Chubb now anticipates operating income in the range of $5.20 to $5.50 per share. The company's previous guidance range was $4.80 to $5.20 per share. Analysts currently anticipate the company to earn $5.15 per share for the full year.
Chubb closed Thursday's regular trading session at $42.61, up $1.07 or 2.58%, on a volume of 3.52 million shares. In after-hours, the share moved up $1.89 or 4.44%, to trade at $44.50. In the last 52-week period, the stock traded in the range of $33.47 to $69.39, on a three-month average volume of 4.09 million shares.
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