Chubb Reports Third Quarter Per Share Net Income and Core Operating Income of $2.63 and $2.00, Respectively; Net Catastrophe Losses Per Share Were $1.76 Versus $0.41 Prior Year; Consolidated Net Premiums Written of $9.1 Billion, Up 5.3%, or 6.0% in Constant Dollars; Commercial P&C Net Premiums Written Globally Up 10.8%
Chubb Reports Third Quarter Per Share Net Income and Core Operating Income of $2.63 and $2.00, Respectively; Net Catastrophe Losses Per Share Were $1.76 Versus $0.41 Prior Year; Consolidated Net Premiums Written of $9.1 Billion, Up 5.3%, or 6.0% in Constant Dollars; Commercial P&C Net Premiums Written Globally Up 10.8% - Net income was $1,194 million versus $1,091 million prior year, and core operating income was $907 million versus $1,236 million prior year. |
[27-October-2020] |
ZURICH, Oct. 27, 2020 /PRNewswire/ -- Chubb Limited (NYSE: CB) today reported net income for the quarter ended September 30, 2020 of $1,194 million, or $2.63 per share, compared with $1,091 million, or $2.38 per share, for the same quarter last year. Core operating income was $907 million, or $2.00 per share, compared with $1,236 million, or $2.70 per share, for the same quarter last year. Book and tangible book value per share increased 3.0% and 4.7%, respectively, from June 30, 2020 and now stand at $124.98 and $81.11, respectively. Book value was favorably impacted by total after-tax net realized and unrealized gains of $1.1 billion in the investment portfolio, principally due to lower interest rates and mark-to-market gains on private equities. Annualized ROE and core operating ROE were 8.6% and 7.0%, respectively. Annualized core operating return on tangible equity was 11.3%.
For the three months ended September 30, 2020 and 2019, the tax expenses (benefits) related to the table above were $(4) million and $(8) million, respectively, for amortization of fair value adjustment of acquired invested assets and long-term debt, and other; $(26) million and $19 million, respectively, for adjusted net realized gains and losses; and $172 million and $219 million, respectively, for core operating income. For the nine months ended September 30, 2020, net income was $1,115 million, or $2.46 per share, compared with $3,281 million, or $7.13 per share, for 2019. Core operating income was $1,873 million, or $4.13 per share, compared with $3,601 million, or $7.83 per share, for 2019. The P&C combined ratio was 98.9% compared to 89.9% prior year, and the current accident year P&C combined ratio excluding catastrophe losses was 86.8% compared to 89.0% prior year. Book and tangible book value per share increased 2.1% and 3.8%, respectively, from December 31, 2019. Book value was favorably impacted by total after-tax net realized and unrealized gains of $539 million, including $1.5 billion in the investment portfolio, principally due to lower interest rates, partially offset by $437 million of unfavorable foreign exchange and a loss of $456 million in the company's variable annuity reinsurance portfolio.
For the nine months ended September 30, 2020 and 2019, the tax expenses (benefits) related to the table above were $(14) million and $(24) million, respectively, for amortization of fair value adjustment of acquired invested assets and long-term debt, and other; $(54) million and $13 million, respectively, for adjusted net realized gains and losses; and $363 million and $637 million, respectively, for core operating income. Evan G. Greenberg, Chairman and Chief Executive Officer of Chubb Limited, commented: "In the third quarter, Chubb performed well despite a challenging environment that included the continued struggle by many nations to address the impact, both health and economic, of the COVID-19 pandemic, as well as a record number of natural catastrophes for the insurance industry globally. We experienced our share of the CATs with $925 million in net pre-tax losses. Yet, we still published a 95% combined ratio, supported by significant underlying underwriting margin improvement. The P&C current accident year combined ratio excluding catastrophes was 85.7% versus 89.5% prior year, with underwriting income up 44% in constant dollars. Of the 3.8 percentage points of increased margin, 2.7 points were from an improvement in the loss ratio. "With strong and continuously improving underwriting conditions in most all regions of the world, we grew P&C net premiums written 6.5% in the quarter in constant dollars, comprised of 10.8% growth in our commercial P&C business and a 3.3% decline in consumer lines. Commercial P&C revenue grew 11% in North America and 12% in our international business. New business growth was up briskly, and we retained our renewal business at very high levels. The global pandemic continues to depress consumer activity and, as a result, premiums declined in our global A&H and international personal lines divisions. We expect both to begin to recover sometime in 2021. On the other hand, our North America high net worth personal lines business is benefiting from a flight to quality and grew about 3% in the quarter. "The current commercial P&C market, as we have observed, is a natural response to prolonged industry underpricing of risk and the loss cost and interest rate environment. I believe the favorable trend will endure. Where we can get paid adequately to assume the risk and volatility, we are growing our exposures across the portfolio while achieving rates that exceed loss costs, and that means margin improvement. We have the people, the capabilities, the execution-oriented culture, and the command and control structure to continue capitalizing on this underwriting environment, and we expect to grow our EPS through both revenue growth and improved margins." Operating highlights for the quarter ended September 30, 2020 were as follows:
Details of financial results by business segment are available in the Chubb Limited Financial Supplement. Key segment items for the quarter ended September 30, 2020 are presented below:
All comparisons are with the same period last year unless otherwise specifically stated. Please refer to the Chubb Limited Financial Supplement, dated September 30, 2020, which is posted on the company's investor relations website, investors.chubb.com, in the Financials section for more detailed information on individual segment performance, together with additional disclosure on reinsurance recoverable, loss reserves, investment portfolio, and debt and capital. Chubb Limited will hold its third quarter earnings conference call on Wednesday, October 28, 2020 beginning at 8:30 a.m. Eastern. The earnings conference call will be available via live webcast at investors.chubb.com or by dialing 800-458-4148 (within the United States) or 323-794-2597 (international), passcode 2361321. Please refer to the Chubb website under Events and Presentations for details. A replay of the call will be available until Wednesday, November 11, 2020 and the archived webcast will be available on our website for approximately one month. To listen to the replay, please click here to register and receive dial-in numbers. About Chubb Regulation G - Non-GAAP Financial Measures Throughout this document there are various measures presented on a constant-dollar basis (i.e., excludes the impact of foreign exchange). We believe it is useful to evaluate the trends in our results exclusive of the effect of fluctuations in exchange rates between the U.S. dollar and the currencies in which our international business is transacted, as these exchange rates could fluctuate significantly between periods and distort the analysis of trends. The impact is determined by assuming constant foreign exchange rates between periods by translating prior period results using the same local currency exchange rates as the comparable current period. Adjusted net investment income is net investment income excluding the amortization of the fair value adjustment on acquired invested assets from the acquisition of The Chubb Corporation (Chubb Corp) of $28 million in Q3 2020 and $90 million for the nine months ended September 30, 2020 and including investment income of $32 million in Q3 2020 from partially-owned investment companies (private equity partnerships) where our ownership interest is in excess of three percent that are accounted for under the equity method. The mark-to-market movement on these private equity partnerships are included in adjusted net realized gains (losses) as described below. We believe this measure is meaningful as it highlights the underlying performance of our invested assets and portfolio management in support of our lines of business. Adjusted net realized gains (losses), net of tax, includes net realized gains (losses) and net realized gains (losses) recorded in other income (expense) related to unconsolidated subsidiaries, and excludes realized gains and losses on crop derivatives. These derivatives were purchased to provide economic benefit, in a manner similar to reinsurance protection, in the event that a significant decline in commodity pricing impacts underwriting results. We view gains and losses on these derivatives as part of the results of our underwriting operations, and therefore realized gains (losses) from these derivatives are reclassified to adjusted losses and loss expenses. P&C underwriting income is calculated by subtracting adjusted losses and loss expenses, policy acquisition costs and administrative expenses from net premiums earned by our P&C operations. We use P&C underwriting income and operating ratios to monitor the results of our operations without the impact of certain factors, including net investment income, other income (expense), interest expense, amortization expense of purchased intangibles, Chubb integration expenses, income tax expense and adjusted net realized gains (losses). Current accident year underwriting income excluding catastrophe losses is underwriting income adjusted to exclude catastrophe losses and prior period development (PPD). We believe it is useful to exclude catastrophe losses, as they are not predictable as to timing and amount, and PPD as these unexpected loss developments on historical reserves are not indicative of our current underwriting performance. We believe the use of these measures enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business. Core operating income, net of tax, excludes from net income the after-tax impact of adjusted net realized gains (losses), Chubb integration expenses, and the amortization of fair value adjustment of acquired invested assets and long-term debt related to the Chubb Corp acquisition. We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business. We exclude adjusted net realized gains (losses) because the amount of these gains (losses) are heavily influenced by, and fluctuate in part according to, the availability of market opportunities. We exclude the amortization of the fair value adjustments related to purchased invested assets and long-term debt and Chubb integration expenses due to the size and complexity of this acquisition. These integration expenses are distortive to our results and are not indicative of our underlying profitability. We believe that excluding these integration expenses facilitates the comparison of our financial results to our historical operating results. References to core operating income measures mean net of tax, whether or not noted. P&C combined ratio is the sum of the loss and loss expense ratio, acquisition cost ratio and the administrative expense ratio excluding the life business and including the realized gains and losses on the crop derivatives, as noted above. Current accident year combined ratio excluding catastrophe losses excludes the impact of catastrophe losses and PPD from the combined ratio. We believe this measure provides a better evaluation of our underwriting performance and enhances the understanding of the trends in our property and casualty business that may be obscured by these items. Global P&C performance metrics comprise consolidated operating results (including corporate) and exclude the operating results of the company's Life Insurance and North America Agricultural Insurance segments. The agriculture insurance business is a different business in that it is a public sector and private sector partnership in which insurance rates, premium growth, and risk-sharing is not market-driven like the remainder of the company's P&C insurance business. We believe that these measures are useful and meaningful to investors as they are used by management to assess the company's global P&C operations which are the most economically similar. We exclude the North America Agricultural Insurance and Life Insurance segments because the results of these businesses do not always correlate with the results of our global P&C operations. Tangible book value per common share is shareholders' equity less goodwill and other intangible assets, net of tax, divided by the shares outstanding. We believe that goodwill and other intangible assets are not indicative of our underlying insurance results or trends and make book value comparisons to less acquisitive peer companies less meaningful. See the reconciliation of Non-GAAP Financial Measures on pages 30-36 in the Financial Supplement. These measures should not be viewed as a substitute for measures determined in accordance with GAAP, including premium, net income, return on equity, and net investment income. NM - not meaningful comparison Cautionary Statement Regarding Forward-Looking Statements: Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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Company Codes: NYSE:CB |
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