Chubb Profit Gains 30% to $656 Million on Underwriting
Chubb Corp. (CB), the insurer of businesses and luxury homes, said first-quarter profit rose about 30 percent on better underwriting margins.
Net income advanced to $656 million, or $2.48 a share, from $506 million, or $1.83, a year earlier, the Warren, New Jersey- based company said today in a statement. Operating profit, which excludes some investment results, was $2.14 a share, beating the $1.74 average estimate of 18 analysts surveyed by Bloomberg.
Chubb joins Travelers Cos. (TRV) in reporting better earnings this week on underwriting results. Chubb Chief Executive Officer John Finnegan, 64, has charged some clients more for coverage and tightened policy terms to improve profitability as low interest rates pressure income from the bond portfolio.
“If you own Chubb, you’re excited about the underlying margin expansion,” Josh Stirling, an analyst at Sanford C. Bernstein & Co., said by phone before today’s statement. Chubb is “a very disciplined, conservative company that is happily shrinking while they drive higher pricing and tighter terms.”
Chubb fell 9 cents to $89.05 today in New York before the company’s statement. The insurer has gained about 18 percent this year, in line with the 22-company Standard & Poor’s 500 Insurance Index. (S5INSU)
Chubb earned 15.4 cents for every dollar in premium collected for the quarter, up from 9.8 cents a year earlier. Travelers, the second-largest U.S. commercial insurer, reported higher first-quarter profit April 23 as margins expanded.
Policy sales advanced 4 percent to $3.1 billion in the quarter from a year earlier. Chubb projected in January that the sales would climb 2 percent to 4 percent this year.
Book value, a measure of assets minus liabilities, rose to $61.79 a share from $60.45 at the end of December.
Property and casualty investment income fell to $288 million from $308 million a year earlier.
The Federal Reserve has held its benchmark lending rate near zero since December 2008 to help stimulate the U.S. economy. The central bank’s policy makers, led by Chairman Ben S. Bernanke, decided to press on with $85 billion in monthly bond buying until the labor-market outlook has “improved substantially,” according to the minutes of the committee’s March 19-20 meeting released this month.
The stimulus efforts have expanded the Fed’s balance sheet to more than $3 trillion for the first time and lowered borrowing costs for governments, companies and individuals. Ten- year Treasury yields were 1.71 percent today after touching a record low 1.38 percent in July.
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