10-QPeriod: Q1 FY2009

Chubb Ltd Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 8, 2009For Securities:CB

Summary

Chubb Ltd. (CB) reported its first quarter 2009 financial results, showing a significant increase in net income to $567 million, up from $377 million in the same period of 2008. This growth was primarily driven by the inclusion of Combined Insurance Company of America (acquired in April 2008) and a substantial reduction in net realized losses compared to the prior year. Net premiums written increased by 9% to $3.42 billion, benefiting from the Combined Insurance acquisition and a crop settlement, though unfavorably impacted by foreign exchange rates when excluding these factors. Despite a challenging economic environment with a deep global recession, Chubb demonstrated resilience. The company's investment portfolio remains largely high-grade fixed income securities. While the company experienced net realized losses of $121 million on investments, this was a significant improvement from the $353 million loss in Q1 2008, reflecting less severe market volatility and improved management of investment strategies. The company's strong liquidity position, coupled with a solid capital base, positions it to navigate the current economic climate.

Financial Highlights

18 data points
Beta

Revenue

$3.58B

Net Income

$567.00M

15.9% Net Margin

EPS (Diluted)

$1.69

Cash & Equivalents

$844.00M

Free Cash Flow

$562.00M

Financial Statements
Beta
Revenue$3.58B
Interest Expense$53.00M
Net Income$567.00M
EPS (Basic)$1.69
EPS (Diluted)$1.69

Key Highlights

  • 1Net income surged 50% year-over-year to $567 million, largely due to the inclusion of the acquired Combined Insurance business and improved investment performance.
  • 2Net premiums written increased 9% to $3.42 billion, with the Combined Insurance acquisition being a key driver of this growth.
  • 3Net realized losses on investments significantly decreased to $121 million from $353 million in the prior year's quarter, indicating stabilization in market conditions.
  • 4The company maintained a strong liquidity position with $1.9 billion in available credit lines and $562 million in net cash from operating activities.
  • 5Total shareholders' equity increased to $14.7 billion, reflecting strong retained earnings supported by profitable operations.
  • 6The combined ratio for the company improved to 87.5% from 84.6% in the prior year, indicating efficient underwriting operations despite increased losses.
  • 7The company is navigating a deep global recession, with management expressing cautious optimism about improving market conditions and a focus on disciplined underwriting and capital management.

Frequently Asked Questions

The acquisition of Combined Insurance Company of America, completed in April 2008, significantly contributed to Chubb's Q1 2009 results. It boosted net premiums written by 11 percentage points and was a primary driver for the increase in net income and overall revenue. The acquired business was integrated across various segments, notably increasing the Life segment's contribution.

Chubb's investment portfolio is primarily composed of investment-grade fixed income securities, with an average credit quality of AA. While the company experienced net realized losses of $121 million in Q1 2009, this was a substantial improvement from the prior year. Management actively monitors credit risk and has a strategy to redeploy cash into high-grade fixed income securities. The company also utilizes derivative instruments to manage market risks, particularly related to its variable annuity guarantee reinsurance business.

Chubb is operating in a deep global recession and acknowledges the market difficulties. The company's strategy emphasizes disciplined underwriting, product and geographic diversification for stability, and a focus on sustained growth in book value through underwriting and investment income. Management notes firming prices in reinsurance and generally stable to improving pricing in direct insurance, while acknowledging that client exposures are down due to the recession.

Despite the recessionary environment, Chubb reported a significant increase in net income for Q1 2009. Management is focused on leveraging its financial strength and capital base. While acknowledging potential negative impacts on growth rates from economic conditions and foreign exchange, the company is experiencing positive pricing trends in reinsurance and stable pricing in direct insurance, suggesting a cautiously optimistic outlook for continued performance.