Friday, April 23, 2010

Insurance: "Chubb Profit Gains 36% to $464 Million on Investments" (CB)

The writers do an excellent job of pointing out some of the issues affecting the insurance and reinsurance companies that I touched on in "Hurricane Watch: Thinking of Shorting the Property/Casualty Insurance Companies (AIG; ALL; BRK.B; CB; HIG; TRV)".
The bolded bits are going to be important going forward.
From Bloomberg:
Chubb Corp., the insurer of commercial property and homes, said profit rose for a fourth straight quarter as investments results improved.

First-quarter net income increased 36 percent to $464 million, or $1.39 a share, from $341 million, or 95 cents, in the year-earlier period, the Warren, New Jersey-based insurer said today in a statement. Operating income, which excludes some investment results, was $1.14 a share, beating the 95 cent average estimate of 21 analysts surveyed by Bloomberg.

Chubb, which invests primarily in corporate and municipal debt, remained profitable through the financial crisis and is among companies returning capital to shareholders. The insurer, led by Chief Executive Officer John Finnegan, raised its dividend by 5.7 percent in February, the 27th straight annual increase, and maintained a stock buyback program, approving in December the repurchase of as much as 25 million common shares....

...Combined Ratio

Chubb earned 6.4 cents for every premium dollar, compared with 11.9 cents in the year-earlier period, as the profit margin dropped because of claims from natural disasters.

Chubb said catastrophe costs surged more than ten-fold to $344 million after record rainfall in the U.S. Northeast and an 8.8 magnitude earthquake that struck Chile in February. The quake, the world’s fifth-strongest in a century, toppled bridges, downed power lines, smashed factories and closed ports. Losses caused by European Windstorm Xynthia that damaged property in Spain, France, Belgium and Germany, also cost the insurer.

Premium revenue from property and casualty insurance slipped about 1.6 percent to $2.78 billion. Chubb is competing for clients as corporations cut jobs and purchases amid the economic slump, reducing demand for coverage. U.S. unemployment has climbed to 9.7 percent from 5 percent at year-end 2007.

‘Competing Ferociously’

Industry rates for protection have slipped at the same time, further pressuring premium revenue. U.S. commercial insurance rates fell 5.3 percent in the first quarter and have dropped each quarter since 2004, according to the Council of Insurance Agents and Brokers.

“Carriers are still competing ferociously for new business and that’s keeping rates soft,” said Ken Crerar, council president, in a statement last week. “Until demand picks up we don’t see any significant uptick in commercial rates for the foreseeable future.”

Chubb has advanced about 29 percent in the past 12 months on the New York Stock Exchange compared with the 86 percent gain in the 24-company KBW Insurance Index....MORE