10-QPeriod: Q1 FY2011

Chubb Ltd Quarterly Report for Q1 Ended Mar 31, 2011

Filed May 6, 2011For Securities:CB

Summary

Chubb Ltd. (formerly Ace Limited) reported its first quarter 2011 financial results, showing a decrease in net income to $259 million, down from $755 million in the prior year's quarter. This decline was significantly impacted by substantial catastrophe losses, totaling $415 million before reinstatement premiums, largely from the Japan earthquake and New Zealand earthquake, as well as Australian storms. Despite these challenges, the company saw an increase in net premiums earned by 1% to $3.31 billion, driven by growth in international retail and U.S. personal lines businesses, though partially offset by competitive market conditions in global reinsurance and higher reinstatement premiums. Investments remain a key focus, with total investments increasing to $52.7 billion. Net investment income rose by 8% to $544 million, benefiting from higher invested asset bases due to acquisitions and positive operating cash flows. However, net realized gains (losses) were negative $45 million, compared to a positive $168 million in the prior year, largely due to the absence of significant realized gains seen in Q1 2010. The company also completed several acquisitions in late 2010 and early 2011 to expand its specialty lines and geographic reach.

Financial Highlights

34 data points
Beta

Revenue

$3.81B

Net Income

$250.00M

6.6% Net Margin

EPS (Diluted)

$0.73

Total Assets

$86.22B

Cash & Equivalents

$1.11B

Free Cash Flow

$1.00B

Financial Statements
Beta
Revenue$3.81B
Interest Expense$63.00M
Net Income$250.00M
EPS (Basic)$0.74
EPS (Diluted)$0.73
Shares Outstanding (Basic)337.09M
Shares Outstanding (Diluted)339.66M

Key Highlights

  • 1Net income decreased significantly by 66% to $259 million due to substantial catastrophe losses ($415 million pre-tax).
  • 2Net premiums earned increased slightly by 1% to $3.31 billion, supported by international retail and U.S. personal lines, but challenged by reinsurance and catastrophe impacts.
  • 3Net investment income grew by 8% to $544 million, reflecting higher invested assets from acquisitions and positive operating cash flows.
  • 4The company experienced a significant increase in catastrophe losses, notably from the Japan earthquake ($215 million net loss), New Zealand earthquake, and Australian storms.
  • 5Acquisitions played a role in shaping the results, with the full quarter impact of Rain and Hail and Jerneh Insurance Berhad, and partial impact of New York Life's Korea operations.
  • 6The combined ratio deteriorated to 105.0% from 92.8% in the prior year, primarily driven by higher loss and loss expense ratios due to catastrophe events.

Frequently Asked Questions

The primary driver of the significant year-over-year decline in net income was a substantial increase in catastrophe losses. The company reported net pre-tax catastrophe losses of $415 million in the first quarter of 2011, compared to $148 million in the prior year quarter. Major contributors to these losses included the Japan earthquake, New Zealand earthquake, and Australian storms.

The company's investment portfolio showed positive performance in terms of income, with net investment income increasing by 8% to $544 million. This growth was primarily attributed to higher average invested asset bases resulting from acquisitions and positive operating cash flows. However, net realized gains (losses) were negative $45 million, a significant decrease from the $168 million realized in the prior year's quarter, largely due to the absence of substantial realized gains seen in Q1 2010.

Premium growth appears mixed. While net premiums earned saw a modest increase of 1% to $3.31 billion, driven by international retail and U.S. personal lines, competitive market conditions in global reinsurance and the impact of catastrophe reinstatement premiums presented headwinds. The company's acquisitions, such as Rain and Hail and Jerneh Insurance Berhad, are expected to contribute to future premium growth, particularly in specialty lines and international markets. The company noted strengthening pricing in certain property classes that had been experiencing decreases.

Underwriting profitability, as measured by the combined ratio, deteriorated significantly, increasing to 105.0% from 92.8% in the prior year. This was primarily driven by a higher loss and loss expense ratio, which rose from 61.9% to 73.4%. The increased loss ratio was substantially impacted by the aforementioned significant catastrophe losses, as well as higher reinstatement premiums. Catastrophe losses alone accounted for a 15.7% increase in the loss ratio in Q1 2011.