Chubb's Q1 Earnings in Line with Ests - Analyst Blog

Chubb Corp.'s CB first-quarter 2014 earnings came in at $1.50 per share in line with the Zacks Consensus Estimate. Earnings, however, declined 30% year over year due to catastrophe losses of $199 million incurred during the reported quarter. In the year-ago quarter, the company incurred a low cat loss of $18 million. 

 

Net written premium for the reported quarter remained unchanged year over year at $3.1 billion. While the company registered 3% growth in premium from its U.S business, it was offset by a 6% decline in premium in the international business. 

 

Property and casualty investment income after tax was down 4% year over year to $277 million.

 

Chubb's underwriting income of $208 million suffered a 57% decline during the quarter, primarily due to the incidence of cat loss. 

 

Combined ratio for the quarter deteriorated by 860 basis points (bps) year over year to 93.2% reflecting loss incurred from catastrophes. 

 

Book value per share, a measure of net worth, was $66.36, up 7.4% year over year.

 

Segment Update 

 

At Chubb Commercial Insurance segment, net written premium decreased 1% year over year to $1.4 billion during the reported quarter. The combined ratio deteriorated by 660 bps year over year to 88.5% due to cat loss. 

 

Chubb Specialty Insurance's net written premiums declined 1% year over year to $624 million due to decline in premium written in the surety lines. The combined ratio deteriorated 150 bps year over year to 88.9%. 

 

Chubb Personal Insurance segment's net written premiums rose 3% year over year to $1.0 billion, primarily driven by higher premium in the Personal lines business followed by Homeowners, partly offset by premium decline in Personal Auto. Due to catastrophe-related losses incurred during the reported quarter, combined ratio deteriorated by 1480 bps year over year to 101.8%. 

 

Capital Management

 

During the quarter, Chubb repurchased 4.7 million shares of its common stock at a total cost of $409 million. 

 

Tight-lipped on 2014 Guidance 

 

The company did not give out any update on its 2014 earnings guidance. However, during the fourth quarter 2013 earnings release, management expressed its expectation of the company producing $7.10 to $7.40 in earnings per share, along with 2% to 4% premium growth, combined ratio in the range of 89% to 90% and a 4% to 6% decline in net investment income. Moreover, cat losses might create a 5% adverse impact on 2014 combined ratio, 1% higher than the 2013 impact. 

 

Our Take

 

Despite facing cat loss during the reported quarter, Chubb did not disappoint investors with its earnings, and managed to report in line with the estimates. We expect the company to deliver strong earnings in the upcoming quarters given improving business conditions such as rate increases as well as an increase in retention ratio. 

 

Moreover, the company's disciplined capital management strategy which includes regular share buyback and dividend payment will aid the bottom line earnings.

 

Other Stocks

 

Among other players – W.R. Berkley Corp. WRB, The Travelers Companies, Inc. TRV and Assurant Inc. AIZ, all reported their first-quarter 2014 earnings ahead of the respective Zacks Consensus Estimate