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Chubb Earnings Gain on Benign Cat Loss

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U.S. property and casualty insurer The Chubb Corp. (CB - Free Report) reported fourth-quarter 2013 operating earnings of $2.07 per share, 4 cents ahead of the Zacks Consensus Estimate, and up 13 times year over year. Earnings benefited from low claims paid during the quarter, growth in premium and a lower share count.

Net written premium for the reported quarter was up 4% year over year to $3.0 billion, led by 7% premium growth in U.S., partly offset by a 3% decline in premium from outside the U.S.  
Property and casualty investment income after tax was down 4% year over year to $284 million.

Combined ratio for the quarter improved markedly by 2570 basis points (bps) year over year to 85.5%, led by a benign cat loss during the quarter.

Book value per share, a measure of net worth, was $64.83, up 7.2% year over year.

Full Year Results

For full year 2013, operating income came in at $9.04 per share, comfortably outpacing its own guidance range of $7.90 to $8.00 per share and the Zacks Consensus Estimate of $7.98 per share.

Segment Update

At Chubb Commercial Insurance segment, net written premium increased 4%  year over year to $1.3 billion during the reported quarter. The combined ratio improved by 2970 bps year over year to 89.0% due to significantly lower cat loss.

Chubb Specialty Insurance’s net written premiums improved 2% year over year to $705 million due to higher premiums written in the surety lines, followed by professional liability lines. The combined ratio improved 660 bps year over year to 81.9%.

Chubb Personal Insurance segment’s net written premiums rose 6% year over year to $1.1 billion, primarily driven by higher premium in the Personal lines business followed by Homeowners and Personal Auto. Due to low catastrophe-related loss the combined ratio improved by 34400 bps year over year to 83.5%.

Capital Management

During the quarter, Chubb repurchased 3.5 million shares of its common stock at a total cost of $325 million.

2014 Guidance

For 2014, Chubb expects to produce $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. The company expects that cat losses will have 5% adverse impact on 2014 combined ratio, which is 1% higher than the 2013 impact.
Chubb carries a Zacks Rank #2 (Buy).

Our Take

Chubb has been posting favorable earnings results for the past several quarters. The company is benefiting from hardening insurance rates coupled with lower losses, owing to the benign cat season this year. We expect the company to maintain its earnings streak going forward as insurance pricing continues to improve and interest rates moves up.

Other Stocks

Other well-placed property and casualty players worth considering are Aspen Insurance Holdings Ltd. (AHL - Free Report) , Endurance Specialty Holdings Ltd. and Navigators Group Inc. (NAVG - Free Report) . All these companies with a Zacks Rank #1 (Strong Buy) are due to release their fourth-quarter and full year earnings in early February.

In-Depth Zacks Research for the Tickers Above

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Chubb Limited (CB) - free report >>

The Navigators Group, Inc. (NAVG) - free report >>

Aspen Insurance Holdings Limited (AHL) - free report >>

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