Chubb Corp. (CB), the insurer of businesses and high-end homes, said it would repurchase as much as $1.3 billion in shares after fourth-quarter profit beat analysts’ estimates.
The operating profit, which excludes some investment results, was 16 cents a share, beating by 62 cents the average estimate of 21 analysts in a Bloomberg survey. Net income fell 77 percent to $102 million, or 38 cents a share, as claims costs climbed after superstorm Sandy, the Warren, New Jersey-based company said today in a statement.
Chubb also remained profitable through Hurricane Katrina in 2005 and the financial crisis of 2008 and 2009 by limiting risks tied to underwriting and investing. Chief Executive Officer John Finnegan raised rates for coverage last year after near record- low bond yields pressured investment income.
“They have a brand and they have a franchise, and so it’s not nearly as commoditized” as it is offering policies to a broader customer base, said Josh Stirling, an analyst at Sanford C. Bernstein & Co., in an interview before results were posted. Selling to commercial clients and the wealthy “gives them more pricing leverage in 2013 than more mass-market firms.”
Chubb has advanced about 19 percent in the past year in New York trading, compared with an 18 percent gain in the 24-company KBW Insurance Index. Results were released after the close of regular trading.
Premium revenue slipped 0.6 percent to $2.93 billion. The company projected that policy sales will climb 2 percent to 4 percent this year.
Chubb said 2013 operating profit will probably be in the range of $6.40 to $6.80 a share, compared with the average estimate of $6.26 in a Bloomberg survey of analysts.
Full-year profit for 2012 fell 7.9 percent to $1.55 billion from $1.68 billion. Book value, a measure of assets minus liabilities, fell to $60.45 a share from $60.99 at the end of September.
Chubb spent $1.11 on claims and expenses for every dollar in premiums for the quarter, compared with a cost of 89.9 cents in the fourth quarter of 2011. Sandy cost the company $882 million before tax in the quarter.
Travelers Cos., which competes against Chubb selling commercial insurance, said fourth-quarter profit fell 51 percent on claims from Sandy.
The U.S. share of insurance losses from worldwide catastrophes more than doubled in 2012, according to the Impact Forecasting unit of Aon Plc, the London-based insurance broker. The U.S. accounted for about 90 percent, or $65 billion, of $72 billion in global losses, Impact said in a statement last week.
Chubb’s fourth-quarter investment income fell to $365 million from $391 million a year earlier as lower interest rates limited what the company earned on its municipal-bond and corporate-debt portfolios.
The latest repurchase plan replaces a program announced last year that authorized buying back as much as $1.2 billion in stock. About $979 million was repurchased under last year’s program, the company said.
Finnegan said he plans to complete the latest buyback plan by January of next year.
To contact the reporter on this story: Elizabeth Bunn in New York at email@example.com
To contact the editor responsible for this story: Dan Kraut at firstname.lastname@example.org