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Chubb (CB) Beats on Q1 Earnings, Grows Y/Y, Revises View

Chubb Limited CB reported first-quarter 2016 operating income of $2.26 per share, which surpassed the Zacks Consensus Estimate of $2.19 by 3.2%. Earnings improved year over year by a penny.

The outperformance was fueled by strong operating and underwriting results. However, adverse forex effect hurt the bottom line by 5 cents in the quarter.

Adjusted for one-time items, net income came in at 97 cents per share, down 53% year over year.

Net premiums written improved 46% year over year to about $6 billion in the quarter. Net premiums earned increased 69% year over year on solid underwriting discipline. Renewal retention rates remained sturdy although adverse forex effect and integration-related activities posed challenges.

Net investment income was $674 million, up 22% year over year.

Property and casualty (P&C) underwriting income totaled $612 million, up 52% year over year. However, combined ratio deteriorated 160 basis points over the prior-year quarter.

Segment Update

North America Commercial P&C Insurance: Net premiums written declined 3.7% year over year to $2.8 billion. Combined ratio improved 140 basis points to 85.2%.

North America Personal P&C Insurance: Net premiums written increased 6.8% year over year to $971 million. Combined ratio improved 1390 basis points to 92.3%.

Overseas General Insurance: Net premiums written decreased 9% year over year to $2.3 billion. Combined ratio deteriorated 270 basis points to 92.2%.

North America Agricultural Insurance: Net premiums written decreased 27% to $64 million, attributable to lower premium retention. Combined ratio deteriorated 390 basis points to 80.6%.

Global Reinsurance: Net premiums written decreased 26.3% to $201 million. Combined ratio deteriorated 410 basis points to 80.6%.

Life Insurance: Net premiums written increased 5.1% to $516 million. International life insurance net premiums and deposits collected improved 3.3% in constant dollars.

Financial Update

Cash balance was $1.1 billion at quarter end, down from $1.8 billion at 2015 end. Total shareholders' equity was $45.9 billion, up from $29.21 billion at 2015 end.

Book value per share at quarter end increased 10.1% from 2015 end to $98.85 at Mar 31, 2016.

Operating cash flow came in at $1.0 billion.

Looking Forward

Chubb estimates integration expense savings of about $750 million by 2018, up from the prior guidance of $650 million.

The company also expects investment income to improve by $100 million to $120 million before tax by the third or fourth quarter. Quarterly investment income is projected between $820 million and $840 million for remainder of the year.

Zacks Rank and Other Stocks

Chubb carries a Zacks Rank#3 (Hold). Among other the P&C insurers that have reported their first-quarter earnings so far, the bottom line at RLI Corp. RLI and First American Financial Corporation FAF surpassed their respective Zacks Consensus Estimate, while Progressive Corp. PGR missed the same.

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RLI CORP (RLI): Free Stock Analysis Report
 
CHUBB LTD (CB): Free Stock Analysis Report
 
PROGRESSIVE COR (PGR): Free Stock Analysis Report
 
FIRST AMER FINL (FAF): Free Stock Analysis Report
 
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