T
he Chubb Corporation endured a big hit to its 2014 first-quarter income, thanks to harsher-than-expected winter weather in the United States, plus a surge in homeowner fire and flood-related losses.
Net income for the New Jersey insurance mainstay reached $449 million, or $1.80 per share, down 32 percent from $656 million, or $2.48 per share, over the same period in 2013. But net written premiums held steady, Chubb Chairman, President and CEO John Finnegan said during the company’s April 24 earnings call after the markets closed.
“First-quarter results were a mixed bag,” Finnegan said simply during the call. He noted that the company achieved strong renewal retention in all of its business lines, and that Chubb maintained strong pricing momentum. Expectations are that the surge in catastrophe and non-catastrophe weather-related losses and homeowner fires should diminish through the rest of 2014, Finnegan said.
“We were an aberration on the low side for a while and this was on the high side,” Finnegan said of the added losses. “Chubb produced solid results in a quarter which was adversely impacted by several factors.”
About $199 million of catastrophe losses before tax affected the overall results, versus $18 million in catastrophe losses in the 2013 first quarter, the company said. Chubb reported that its net written premiums for the 2014 first quarter came in at $3.1 billion, flat versus the 2013 first quarter. Premiums jumped 3 percent in the U.S., but declined 6 percent internationally, where competition is greater.
Chubb’s combined loss and expense ratio during the first quarter climbed to 93.2, versus 84.6 in the 2013 first quarter. Pull the catastrophe impact out of the equation, and the combined ratio comes in at 86.6 in the 2014 first quarter, versus 84 in the first three months of 2013.
The surge in losses ranged from flooding for homeowner customers in an affluent section of Palm Beach County, Fla., to homeowner fire losses, both catastrophic and non-catastrophic in nature, Chubb said. When pressed, Finnegan explained during the investor call that the fire losses did not erupt in any particular geographic area.
“There was no geographic concentration,” he said. “Most fire losses were due to bad fortune [with] no pattern, really.”
Still, those weather-related and other catastrophe losses hurt. Chubb’s homeowners insurance produced a 104.9 combined ratio during the quarter, with catastrophe impact accounting for nearly 18 percentage points of the total, the company said. Catastrophes contributed 6.1 percentage points to the 88.5 combined ratio that the company’s commercial insurance arm reported during the quarter, versus 81.9 a year ago.
As well, property/casualty investment income after taxes dipped to $277 during the 2014 first quarter, down 4 percent from $288 million the previous year.
Still, Chubb had some bright spots to report from its personal insurance, commercial insurance, specialty insurance and reinsurance divisions for the 2014 first quarter. Among them:
Chubb produced “mid-to-high-single digit increases” in its rate change metrics for all of its business units.
Chubb invested $409 million to buy back 4.7 million shares of its common stock, a trend many of its peers are following.
The company said its average first quarter renewal rates for professional liability jumped 7 percent.