Chubb Ltd. saw its net income soar in the 2017 second quarter, and investment income also reached record levels. Chairman and CEO Evan Greenberg said during the company’s July 26 earnings call that the insurer and reinsurer is becoming “a revenue machine.”
Chubb’s net income for the second quarter ending June 30 surpassed $1.3 billion, compared with $726 million for the same quarter last year‚ a 79 percent increase. Operating income was nearly $1.2 billion compared with $1,058 million for the same quarter last year.
The property/casualty (P&C) combined ratio was 88.0 for the quarter, which was two points better than the prior year (91.2) , and in line with the P/C combined ratio of 87.8 for the six months ending June 30. Net investment income hit $855 million, higher than guidance and nearly 5 percent above the same period a year ago, Greenberg said during the earnings call.
“We are operating in a highly competitive [property/casualty] market and navigating it well,” Greenberg added. “No other company is better diversified.”
Greenberg credited strong underwriting and record investment income for the quarter’s results. He said in prepared remarks that the company’s combined ratio of 88.0 for the quarter was “truly distinguishing given soft market conditions that have continued for a number of years now.”
Chubb benefited from a substantial improvement in both expense ratio and loss ratio as a result of merger-related efficiencies and underwriting actions as well as lower catastrophe losses, Greenberg said.
“Although the commercial P/C market is soft around the globe, the trend for pricing improved for the business we wrote with rates flat or the rate of decline substantially slowing in most classes, while in some particularly stressed areas we achieved rate,” Greenberg said. “Our premium revenue growth continued to trend better, as we projected, and was our best since the merger. We wrote less new business in line with our underwriting discipline while renewal retentions were steady.”
Greenberg said that today’s Chubb, formed by the ACE acquisition of Chubb that closed in January 2016, is in “excellent shape” with its integration-related efficiency efforts. The company now expects to achieve annualized run-rate savings of $875 million by the end of 2018, up from the prior estimate of $800 million. Integration and merger-related expenses are now estimated to be $903 million, up from $809 million. Greenberg said the savings are coming from many areas across the company including support services, personnel, IT and even to some extent in real estate but not from underwriting or sales/marketing.
Merger-related underwriting actions (including the cancellation of certain portfolios or lines of business that do not meet company underwriting standards) and the purchase of additional reinsurance adversely impacted P/C net premiums written growth by $198 million, or 2.8 percentage points. Net premiums earned decreased 2.3 percent. Excluding merger-related underwriting actions, P/C net premiums earned were virtually flat with prior year.
Greenberg, speaking to analysts, said that while large account business has for some time been and still remains very competitive, middle market business is now becoming more competitive as carriers attempt to grow and he expects it to remain competitive for awhile.
*A version of this story appeared previously in our sister publication Insurance Journal