10-QPeriod: Q2 FY2009

Chubb Ltd Quarterly Report for Q2 Ended Jun 30, 2009

Filed August 7, 2009For Securities:CB

Summary

Chubb Ltd. (CB), operating as Ace Limited during this period, reported a mixed financial performance for the second quarter of 2009. The company experienced a 28% decrease in net income to $535 million compared to $746 million in the prior year quarter, largely influenced by net realized losses and a higher income tax expense. Despite the decline in net income, total revenues saw a 7% decrease to $3.55 billion, driven by lower net premiums earned, which were impacted by a strong U.S. dollar and economic recession. However, the company demonstrated resilience in its underwriting income, which remained robust across segments, particularly in Global Reinsurance and Insurance – Overseas General. The company's investment portfolio showed positive signs with unrealized gains increasing, and management indicated a tactical shift towards corporate bonds from equity holdings to improve book yield and investment income over time. Liquidity remained strong, with substantial access to credit facilities, and the company continued its practice of returning capital to shareholders through dividends. Overall, while facing macroeconomic headwinds, Ace Limited maintained disciplined underwriting and a solid financial position.

Financial Highlights

30 data points
Beta

Revenue

$3.55B

Net Income

$535.00M

15.1% Net Margin

EPS (Diluted)

$1.58

Total Assets

$75.66B

Cash & Equivalents

$654.00M

Free Cash Flow

$760.00M

Financial Statements
Beta
Revenue$3.55B
Interest Expense$56.00M
Net Income$535.00M
EPS (Basic)$1.58
EPS (Diluted)$1.58
Shares Outstanding (Basic)336.90M
Shares Outstanding (Diluted)337.51M

Key Highlights

  • 1Net income decreased by 28% to $535 million for the second quarter of 2009, compared to $746 million in the same period of 2008, primarily due to net realized losses and higher taxes.
  • 2Total revenues decreased by 7% to $3.55 billion, reflecting lower net premiums earned, impacted by foreign exchange rates and economic conditions.
  • 3Underwriting income remained strong across key segments, indicating disciplined underwriting practices.
  • 4The company's investment portfolio saw an increase in net unrealized gains, and management adjusted its allocation towards corporate bonds.
  • 5Global Reinsurance and Insurance – Overseas General segments demonstrated resilient underwriting income.
  • 6Liquidity remained strong with substantial access to credit facilities, totaling $2.5 billion in available credit lines.
  • 7Ace Limited continued to return capital to shareholders via dividends, with a focus on par value reductions as part of its Swiss redomestication strategy.

Frequently Asked Questions

The decrease in net income was primarily driven by a significant increase in net realized losses (including other-than-temporary impairment losses) and a higher income tax expense. The company also experienced lower net investment income due to a shift towards cash and short-term investments and unfavorable foreign exchange movements.

The strong U.S. dollar and the ongoing economic recession negatively impacted net premiums earned and written, particularly in international operations. Exposure reductions due to the recession also affected lines like workers' compensation and accident & health.

Management has tactically shifted its investment portfolio by liquidating a majority of its publicly traded equity holdings and investing the proceeds in corporate bonds. This strategy aims to improve book yield and investment income over time, with a focus on high-grade fixed-income securities and upper-tier high-yield corporate bonds.

Ace Limited maintains strong liquidity with access to substantial credit facilities totaling $2.5 billion. The company continues to generate positive cash flows from operations and has sufficient capital resources to meet its obligations, including dividend payments to shareholders.