Chubb (CB) Q4 Earnings Beat Estimates, Premiums Increase

Chubb Limited CB reported fourth-quarter 2017 core operating income of $3.17 per share, which surpassed the Zacks Consensus Estimate of $2.31 by 37.2%. Moreover, the bottom line improved 16.5% from the prior-year quarter.

Although the quarter under review was affected by the two largest California wildfires in history, the company’s results still reflected optimism. The highlights of the quarter were bottom-line growth, driven by a one-time benefit from tax reform, stellar segmental underwriting performance (excluding catastrophe loss), improving commercial property and casualty (P&C) pricing in the company’s numerous business worldwide and a core operating return on equity (ROE) of 12%.

Including one-time integration and merger-related expenses of 12 cents, amortization of fair value adjustment of acquired invested assets and long-term debt of 9 cents and net realized gains of 31 cents, net income of $3.27 per share declined 4.1% from the year-ago quarter.

Full-Year Highlights

For 2017, Chubb reported core operating income per share of $8.03, outpacing the consensus mark by 11.5% but deteriorating 20.7% year over year.

Quarter in Detail

Net premiums written improved 1.6% year over year to about $7.1 million in the quarter. Net premiums earned increased 2.3% to $7.2 million.

Net investment income was $797 million, up 7.1% from a year ago.

Property and casualty underwriting income was $623 million, which plunged 21.6% from the year-ago quarter. This downside is attributable to the catastrophe loss incurred in the quarter. Combined ratio deteriorated 290 basis points (bps) to 90.7%.

Segment Update

North America Commercial P&C Insurance: Net premiums written declined 2.9% year over year to $2.9 billion. Combined ratio deteriorated 140 bps to 86.2%.

North America Personal P&C Insurance: Net premiums written increased 5.8% year over year to $1.1 billion. Combined ratio deteriorated 1920 bps to 107.5%.

Overseas General Insurance: Net premiums written rose 2.8% year over year to $2.2 billion. Combined ratio improved 630 bps to 101.6%.

North America Agricultural Insurance: Net premiums written skyrocketed 215% year over year to $126 million. Combined ratio came in at 24.4% against (25.4%) in the prior-year quarter.

Global Reinsurance: Net premiums written declined 7.9% year over year to $105 million. Combined ratio of 111.2% deteriorated 3170 bps from the year-ago quarter.

Life Insurance: Net premiums written improved 16.9% year over year to $943 million.

Financial Update

Cash balance was $728 million as of Dec 31 2017, down approximately 26.1% from the end of 2016. Total shareholders’ equity grew about 6% to $51.2 million as of Dec 31, 2017.

Book value per share was $110.32 as of Dec 31, 2017, up nearly 6.5% from year-end 2016.

Operating cash flow was $1.1 billion for the reported quarter.

Share Repurchase Update

Chubb spent $123 million to buy back 0.8 million shares in the quarter. For 2017, the company bought back 5.9 million shares worth $830 million.

Zacks Rank

Chubb carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among other players from the insurance industry having reported fourth-quarter earnings, the bottom line of Brown & Brown, Inc. BRO, MGIC Investment Corporation MTG and The Progressive Corporation PGR beat the respective Zacks Consensus Estimate.

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