Catastrophe losses contributed to Chubb’s net income decreasing in Q1 2014

The Chubb Corporation’s financial results for the first quarter of the year were adversely affected by catastrophe losses, related mostly to severe winter weather in the United States, contributing to a decrease in net income compared to the same period last year.

Overall, net income for the first quarter of 2014 fell to US$449 million from US$656 million in the same quarter of 2013, notes a statement from Chubb, a global provider of property and casualty insurance products.

Catastrophe losses of US$199 million before tax – considerably higher than the US$18 million before tax in the first quarter of 2013 – adversely affected Chubb’s 2014 first quarter results.

The combined ratio of 93.2% in 2014 Q1, which includes a 6.6-point impact of catastrophes, compares to 84.6% in 2013 Q1. The impact of catastrophes on the 2013 Q1 combined ratio was 0.6 points.

“Excluding the impact of catastrophes, the first quarter combined ratio was 86.6% in 2014 and 84.0% in 2013. The expense ratio for the first quarter was 32.1% in 2014 and 32.3% in 2013,” notes the company statement.

Chubb reports that net written premiums for 2014 Q1 were US$3.1 billion, flat compared to the first quarter of 2013. Excluding the effect of foreign currency translation, premiums were up approximately 1%, the statement notes. In addition, premiums were up 3% in the U.S. and down 6% outside the U.S.

Other results for 2014 Q1 compared to 2013 Q1 include the following:

• net income per share was US$1.80 compared to US$2.48;
• operating income per share was US$1.50 compared to US$2.14;
• operating income (which the company defines as net income excluding after-tax realized investment gains and losses) was US$374 million compared to US$566 million; and
• property and casualty investment income after taxes was US$277 million compared to US$288 million.

Looking specifically at lines of business, Chubb Personal Insurance net written premiums increased 3% in 2014 Q1 to US$1 billion from US$987 million in the first quarter of 2013, and its combined ratio was 101.8%, compared to 87.0%.

Specifically, net written premiums for Homeowners increased 4% (to US$592 million from US$570 million), Personal Automobile premiums declined 2% (to US$173 million from US$176 million) and Other Personal lines increased 3% (to $US 248 million from US$241 million).

For Chubb Commercial Insurance (CCI), net written premiums declined 1% in the first quarter of 2014 to US$1.425 billion (from US$1.44 billion in 2013 Q1). “Excluding the impact of catastrophes, CCI’s first quarter combined ratio was 82.4% in 2014 and 83.6% in 2013,” notes the company statement.

And for Chubb Specialty Insurance, net written premiums declined 1% in the first quarter of 2014 to US$624 million (from US$632 million in 2013 Q1).

“Chubb produced solid results in the first quarter of 2014,” John D. Finnegan, the company’s chairman, president and CEO, says in the statement. “Although catastrophe losses alone had an adverse impact of $0.52 per share in the first quarter, we still generated operating income of $1.50 per share and net income of $1.80 per share, reflecting a combined ratio of 86.6% excluding catastrophes,” Finnegan says.

“We remain encouraged by the mid-to-high-single-digit increases in our rate change metrics that we achieved in all of our business units during the first quarter, while enjoying an overall increase in renewal retention,” he adds.