Chubb Corp. (CB:US), the insurer of corporate boards and high-end homes, said profit fell 3.6 percent as investment income declined.
Second-quarter net income dropped to $404 million, or $1.48 per share, from $419 million, or $1.42, a year earlier when there was more stock outstanding, the Warren, New Jersey-based company said today in a statement. Operating profit, which excludes some investment results, was $1.37 a share, beating the $1.15 average estimate of 23 analysts surveyed by Bloomberg.
Chief Executive Officer John Finnegan has been raising rates for coverage as near record-low bond yields pressure investment income. Federal Reserve Chairman Ben S. Bernanke has said the central bank will keep U.S. interest rates low through at least late 2014 to stimulate growth in the world’s largest economy. Chubb’s bond portfolio was valued at about $37 billion as of March 31.
“If you roll over your portfolio, you just can’t get the same kind of yields,” said Gloria Vogel, an analyst with Drexel Hamilton LLC, in an interview before results were released. “Investment yields are very low.”
Investment income fell to $373 million from $394 million a year earlier. Book value, a measure of assets minus liabilities, rose to $58.54 a share from $57.37 on March 31.
Chubb has gained less than 1 percent this year to $69.55 in New York Stock Exchange trading, compared with a decline of 0.7 percent in the 24-company KBW Insurance Index. (KIX) Results were released after the close of regular trading.
Premium revenue rose to $2.98 billion from $2.91 billion a year earlier. Property-casualty insurers increased rates by 4 percent in the second quarter from a year earlier, according to MarketScout data compiled by Bloomberg.
The insurer lifted its full-year guidance for per-share operating income to a range of $5.70 to $5.95. That compares with a projection of $5.30 to $5.70 in January.
Chubb is “encouraged by the continued upward momentum of rate increases in all our businesses,” Finnegan said in the statement.
Chubb earned an underwriting profit of 6.2 cents on every dollar it collected in premiums for the quarter, up from 5.1 cents a year earlier. The insurer said catastrophes cost $223 million before taxes in the three months ended June 30, compared with $329 million a year earlier.
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