Chubb hit by investments

Chubb has revealed a $1bn (£700m) fall in net income to $1.8bn due to poor investment performance with operating income falling by $600m to $2bn.

Other main results:

• Operating income per share declined 13% to $5.58 from $6.41
• Total net written premiums in 2008 decreased 1% to $11.8bn. Premiums were down 3% in the US and up 6% outside the US (up 3% in local currencies)
• The combined ratio rose to 88.7% from 82.9%.
• Catastrophes accounted for 5.1 percentage points of the combined ratio in 2008 and 3.0 points in 2007. Excluding the impact of catastrophes, the combined ratio was 83.6% up from 79.9%.
• The expense ratio for the year was 30.2% up from 30.1%.
• Property and casualty investment income after taxes increased 2% to $1.3bn.
• Net income reflected net realised investment losses, including impairments, of $371m before tax ($0.66 per share after-tax). In 2007 that was an investment gain of $374m ($0.60 per share after-tax).
• Chubb repurchased 26.3 million shares of its common stock at a total cost of $1.3m.

John D. Finnegan, chairman, president and chief executive officer, put a brave face on the decline: “Chubb’s operating income for all of 2008 was $2.bn , the third-highest achieved in any year in the corporation’s history, thanks to significant contributions from all three business units. This result was achieved in the face of high catastrophe losses for the year, deepening distress in many sectors of the global economy as well as declining insurance rates for the past four years. It is testimony to the unique strengths of Chubb’s franchise and our ability to earn a strong underwriting profit in a variety of economic circumstances,” he said.

“While net income was adversely affected by continued turmoil in capital markets, the relatively modest size of our investment losses reflects the successful execution of our conservative philosophy in managing our $39bn portfolio.”

Fourth Quarter

Chubb reported net income in the fourth quarter down from $650m to $407m with operating income (not including investments) falling from $620m to $569m

Net written premiums were cut 4% to$2.9m, with about half to currency fluctuation, the company said. Premiums were down 2% in the US and 8% outside the US, though they rose by 1% in local currencies.

Other main points:

• combined loss and expense ratio was 84.3% up from 83.8% excluding the impact of catastrophes (negligible this quarter) the combined ratio was 84.6% in 2008 and 80.0% in 2007. The expense ratio for the fourth quarter was 30.4% in 2008 and 30.5% in 2007.
• property and casualty investment income after taxes down 5% to $316m from $33m.
• net realised investment losses, including impairments, of $250m before tax ($0.45 per share after-tax), stemming primarily from the company’s equity and alternative investments.
• net income included net realized investment gains of $46m before tax ($0.08 per share after-tax).
• Chubb repurchased 3.6 million shares of its common stock at a total cost of $164m.