Canadian Underwriter

Chubb reports P&C combined ratio of 110.8% for third quarter of 2017

October 30, 2017   by Canadian Underwriter

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Chubb Limited has reported a P&C combined ratio of 110.8% for the third quarter of 2017, up 24.8 points from the same quarter last year and “driven by significant catastrophe losses.”

“While it was a tough quarter for cats, it’s the business we’re in,” Evan G. Greenberg, chairman and chief executive officer of Chubb, said in a press release late last week announcing the company’s latest financial results. “We experienced a series of significant natural catastrophes, including three hurricanes and two earthquakes, which will likely produce the third US$100 billion-plus year for insured catastrophe losses globally for the industry in the last 12 years. We ran a 111% combined ratio and produced a loss of 13 cents per share, or essentially a quarter of our annual earnings, which is within our tolerance for risk and the amount of loss we would expect for these events.”

The P&C combined ratio excluding cat losses was 84.7%. The P&C current accident year combined ratio excluding cat losses was 88.5%, compared with 88.9% in 2016. P&C current accident year underwriting income excluding catastrophe losses was US$839 million, up 5.6%.

Pre-tax cat losses, net of reinsurance and including reinstatement premiums, were US$1.89 billion in the quarter, including US$650 million, US$891 million, and US$220 million from Hurricanes Harvey, Irma, and Maria, respectively; US$25 million from the earthquakes in Mexico and US$107 million from other cat losses. After-tax cat losses were US$1.53 billion in the quarter ending Sept. 30, Chubb added in the release.

Overall, Chubb reported a net loss of US$70 million in the latest quarter compared to a net income of US$1.36 billion in the prior year quarter. Operating loss was US$60 million in Q3 compared with operating income of US$1.36 billion in the prior year quarter. Excluding cat losses, operating income was US$1.47 billion in the quarter compared to US$1.46 billion in the prior year.

Consolidated and P&C net premiums written (NPW) were up 4.3% and 4.6%, respectively, to US$7.9 billion and US$7.4 billion. Global P&C (excluding agriculture) NPW were US$6.4 billion in the most recent quarter, up 4% from US$6.2 billion in Q3 2016.

Chubb reported that merger-related underwriting actions adversely impacted P&C NPW growth by US$87 million, or 1.3 percentage points. In addition, NPW growth was favourably impacted by US$128 million, or 1.9 percentage points, from a one-time unearned premium reserve (UPR) transfer in 2016 which reduced NPW in the prior year. Excluding merger-related underwriting actions and the one-time UPR transfer, P&C net premiums written increased 4.0%.

North America Commercial P&C Insurance saw NPW of US$3.09 billion in Q3 2017, down 0.6% from US$3.11 billion in Q3 2016. The sector’s combined ratio was up 109.6% in the most recent quarter, up from 86.2% in Q3 2016. NPW for North America Personal P&C Insurance were US$1.19 billion in the most recent quarter, up 18% from US$1.01 billion in Q3 2016. North America Personal P&C Insurance’s combined ratio was 120.8% in Q3 2017 compared to 84.4% in Q3 2016. Overseas General Insurance NPW were US$1.96 billion, up 1.2% from US$1.94 billion in the third quarter of 2016; the sector’s combined ratio was 101.6%, up from 81.2% in Q3 2016.

Other results for the quarter:

  • North America Agricultural Insurance – NPW increased 9.0% in Q3 2017. The combined ratio was 90.4%, compared with 88.9% in the prior-year quarter. The current accident year combined ratio excluding catastrophe losses was 90.3%, compared with 90.1% in Q3 2016;
  • Global Reinsurance – NPW increased 47.1%, or 47.9% in constant dollars, primarily due to net reinstatement premiums collected of US$37 million related to cat loss events in the quarter as well as a new treaty written of US$14 million. The combined ratio was 187.4%, up drastically from 66.3% a year ago. The current accident year combined ratio excluding cat losses was 82.2%, compared with 78.1%;
  • Life Insurance – Segment income was US$64 million, compared with US$69 million one year ago. International life insurance NPW and deposits collected increased 28.1% in constant dollars.

Greenberg said that he believes the company is “at the beginning of a firming price environment, driven by years of soft pricing that has resulted in inadequate rates in many classes. The magnitude of this year’s cat losses, which on a worldwide aggregate basis was between a one-in-five and one-in-10 year industry event, simply adds to the pressure to return to pricing that produces an adequate risk-adjusted return. Our company is in great shape from the perspectives of risk management, growth opportunity and financial efficiency. We are investing aggressively in our future while delivering results to shareholders today, and we are optimistic about the future.”

Chubb is the world’s largest publicly traded property and casualty insurance company. With operations in 54 countries, Chubb provides commercial and personal P&C insurance, personal accident and supplemental health insurance, reinsurance and life insurance. Chubb maintains executive offices in Zurich, New York, London and other locations, and employs approximately 31,000 people worldwide.

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