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Chubb’s Q2 net income, $496 million


July 27, 2005   by Canadian Underwriter


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The Chubb Corporation (NYSE: CB News) net income in the second quarter of 2005 is $496 million, a 39% increase over net income of $356 million in the second quarter of 2004. Net income per share increased 32% to $2.45 from $1.85.
Operating income, which the company defines as net income excluding after-tax realized investment gains and losses, increased 35% in the second quarter of 2005 to $461 million from $341 million in the second quarter of 2004. Operating income per share grew 29% to a record $2.28 from $1.77.
Net written premiums for the second quarter increased 6% to $3.1 billion. Premiums for the insurance business grew 8%: up 7% in the U.S. and 13% outside the U.S. (8% in local currencies). Premiums for the reinsurance assumed business (Chubb Re) declined 14%.
The combined loss and expense ratio for the second quarter was 88.3%, compared to 92.8% in the second quarter of 2004. Catastrophe losses for the 2005 second quarter were $21 million, accounting for 0.7 percentage points of the combined ratio. In the second quarter of 2004, catastrophe losses (excluding the release of $80 million of net reserves for losses related to the September 11, 2001 attack on the World Trade Center) were $46 million, representing 1.6 percentage points of the combined ratio. The expense ratio improved to 28.0% from 29.5%.
Property and casualty investment income after taxes for the second quarter increased 12% to $261 million from $232 million in 2004.
For the first six months of 2005, net income was $965 million or $4.82 per share, compared with $717 million or $3.73 per share for the first half of 2004. Operating income totaled a record $902 million or $4.50 per share for the first half of 2005, compared with $649 million or $3.38 per share for the first half of 2004.

Net written premiums for the first six months increased 4% to $6.2 billion. Premiums for the insurance business grew 5%: up 4% in the U.S. and 10% outside the U.S. (5% in local currencies). Premiums for the reinsurance assumed business (Chubb Re) declined 13%.
The combined ratio for the first half was 88.9% in 2005 and 92.7% in 2004. Catastrophe losses for the first half of 2005 were $41 million, accounting for 0.7 percentage points of the combined ratio. In the first half of 2004, catastrophe losses (excluding the aforementioned September 11 reserve release) were $142 million, representing 2.5 percentage points of the combined ratio. The first half expense ratio improved to 28.4% from 29.8%.
Property and casualty investment income after taxes increased 13% to $514 million in the first half of 2005 from $454 million in the corresponding period a year earlier.
Chubb Personal Insurance net written premiums grew 8% to $871 million. CPI’s combined ratio improved to 81.0% from 89.6% in the second quarter of 2004, driven primarily by excellent results in Homeowners insurance. Catastrophe losses accounted for 1.5 percentage points of the second quarter combined ratio in 2005, compared with 4.9 points in 2004.
The Homeowners line grew 10%. The combined ratio was 73.7%, which included 2.5 percentage points of catastrophe losses. Personal Automobile grew 3% and had a combined ratio of 95.2%, while Other Personal grew 7% and had a combined ratio of 91.6%.
Chubb Commercial Insurance net written premiums grew 6% to $1.3 billion. The combined ratio was 86.7%, compared to 73.6% in the corresponding quarter of 2004. Excluding the $80 million September 11 net reserve release, CCI’s combined ratio in the second quarter of 2004 was 80.5%. Second quarter catastrophe losses accounted for 0.9 percentage points of the combined ratio in 2005 and 0.8 points in 2004 excluding the September 11 reserve release.
Average renewal rates in the U.S. were down 1% for CCI, which retained 84% of the U.S. premiums that came up for renewal. In the U.S., premiums from new accounts exceeded lost business by a 1.2-to-1 margin.
Chubb Specialty Insurance net written premiums grew 12% to $743 million. The combined ratio was 98.3%, compared with 128.6% in the second quarter of 2004.
Professional Liability (PL) net written premiums grew 12%, attributable largely to the company’s decision not to renew a reinsurance treaty. PL had a combined ratio of 101.4%, compared with 134.1% in the second quarter of 2004. The 2004 results included $160 million of net reserve strengthening for errors & omissions losses related to investment banks. Average renewal rates in the U.S. for PL were down 2%, and the renewal retention rate was 89%. In the U.S., premiums from new accounts exceeded lost business by a 1.9-to-1 margin.
Surety premiums were up 13%, and the combined ratio was 54.2%.
Reinsurance Assumed (Chubb Re) net written premiums declined 14% to $230 million. The combined ratio improved to 91.3% from 95.1% in the second quarter of 2004.