Chubb Q4 Earnings Beat on Premium Growth; Guides for 2015

The Chubb Corporation (CB) reported fourth-quarter 2014 operating income of $2.29 per share, which surpassed the Zacks Consensus Estimate by 6% and improved 11% year over year.

The company’s results came in way above its upper range of the earnings guidance of $2.00–2.10 per share. Better-than-expected earnings came from higher premium written in its Personal and Commercial lines of business along with lower catastrophe loss. A lower share count due to share buyback also contributed to bottom-line growth.

Net written premium for the reported quarter rose 3% year over year to $3.1 billion. While the company registered a 4% rise in premium from its U.S. business, premium remained flat in its international business. Property and casualty investment income after taxes came in at $267 million, down 6% year over year.

Chubb’s underwriting income of $477 million increased 10.9% year over year on the rise in premiums earned.

Combined ratio for the quarter improved 120 basis points (bps) year over year to 84.3%, reflecting low CAT losses.

Book value per share, which is a measure of net worth, was $70.12, up almost 8.2% year over year.

Full-Year Results

Operating income per share was $7.63, down 5% but ahead of the Zacks Consensus Estimate of $7.51. Here too, the company earned higher than its upper range of the guided $7.35–$7.45.

Segment Update

At Chubb’s Personal Insurance segment, net written premium increased 4% year over year to $1.1 billion during the reported quarter. The combined ratio deteriorated marginally by 40 bps year over year to 83.9%. Within the segment, net written premiums for Homeowners, Personal Automobile and Other Personal lines increased 3%, 4% and 6%, respectively.

The Commercial Insurance segment’s net written premiums rose 5% year over year to $1.3 billion, primarily driven by higher premium in Workers’ followed by Property and Marine insurance. Combined ratio improved 50 bps year over year to 88.5%.

Specialty Insurance’s net written premiums were down 1% from the year-earlier quarter to $701 million, primarily attributable to a 6% decline in premium from its Surety lines of business. The combined ratio, however, improved 520 bps year over year to 76.7%.

Capital Management

During the reported quarter, Chubb repurchased 3.4 million shares of its common stock for $346 million.

The company’s board of directors also authorized a new $1.3 billion share repurchase program.

2015 Guidance

The company provided guidance for 2015 earnings and the components forming it. It expects earnings in the range of $7.35 to $7.65 per share, which incorporates an increase of 1% to 3% in net written premiums, a combined ratio of 89% to 90%, a decline of 6% to 8% in property and casualty investment income after taxes, and approximately 230 million average diluted shares outstanding. The Zacks Consensus Estimate is $7.78 per share.

Currently, Chubb holds a Zacks Rank #1 (Strong Buy).

Other Stocks to Consider

Other stocks in the property and casualty space worth considering this earnings season include:

The Allstate Corporation (ALL). Allstate with a Zacks Rank #1 and an Earnings ESP of +1.81%. Allstate will announce fourth-quarter and full-year 2014 results after the closing bell on Feb 4.

PartnerRe Ltd. (PRE). PartnerRe with a Zacks Rank #2 (Buy) and an Earnings ESP of +8.08%. PartnerRe will announce fourth-quarter and full-year 2014 results after the closing bell on Feb 2.

XL Group plc (XL). XL Group with a Zacks Rank #3 (Hold) and an Earnings ESP of +4.55%. XL Group will announce fourth-quarter and full-year 2014 results after the closing bell on Feb 2.