Chubb Authorizes Share Buyback as Profit Beats Estimates
January 27, 2012, 4:50 AM ESTBy Andrea Ludtke
(Updates with sales gain in sixth paragraph.)
Jan. 26 (Bloomberg) -- Chubb Corp., the insurer of commercial property and high-end homes, said it would buy back as much as $1.2 billion in shares after posting fourth-quarter profit that beat analysts’ estimates as sales advanced.
Net income slipped 27 percent to $452 million, or $1.60 a share, from $620 million, or $2.02, a year earlier, the Warren, New Jersey-based company said in a statement today after the close of regular trading. Operating profit, which excludes some investment results, was $1.63 a share, beating by 3 cents the average estimate of 22 analysts surveyed by Bloomberg.
U.S. commercial insurers have been raising rates as catastrophe claims pressure underwriting results and near record-low yields limit income from bond portfolios. The average rate increase of 2.8 percent in the fourth quarter was led by gains in workers’ compensation and commercial-property coverage, the Council of Insurance Agents & Brokers said Jan 24.
Chubb is among firms that may benefit “based on sustained improvement in commercial property and casualty insurance pricing, which has achieved a positive inflection point for the first time since 1999,” Jay Gelb, an analyst at Barclays Plc, said in a note to investors yesterday.
Fourth-quarter policy sales climbed to $2.97 billion from $2.85 billion a year earlier. Chubb projected 2012 operating profit of $5.30 to $5.70 per share, compared with $5.12 in 2011. The projection is based on a sales gain of 2 percent to 4 percent.
Commercial Rates
“The fourth quarter was especially encouraging as the commercial rate environment continued to improve,” Chief Executive Officer John Finnegan said in the statement.
Chubb has risen 19 percent in the past 12 months, compared with the 11 percent fall in the 24-company KBW Insurance Index.
Book value per share, a measure of assets minus liabilities used by analysts and investors, rose to $57.15 from $56.23 as of Sept. 30. Full-year net income for 2011 fell to $1.68 billion from $2.17 billion in 2010 on higher catastrophe costs in the first nine months of 2011.
Travelers Cos., the only insurer in the Dow Jones Industrial Average, had its least profitable year since 2004 as fourth-quarter profit fell 31 percent to $618 million on lower investment income and a smaller reserve benefit.
Chubb’s realized investment losses were $8 million, compared with a $101 million gain a year ago. Chubb said the fluctuation reflects the performance of so-called alternative investments, which may include private-equity assets. The results are not included in operating income.
The insurer spent 89.9 cents of every premium dollar on claims and expenses, compared with 87 cents a year earlier. The prior buyback program, which provided for the repurchase of as many as 30 million shares, has been completed, Chubb said today.
--Editors: Dan Kraut, William Ahearn
To contact the reporter on this story: Andrea Ludtke in New York at aludtke@bloomberg.net
To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net
