Chubb Limited has reported a net loss for the quarter ended September 30, 2017 of $(70) million, or $(0.15) per share, compared with net income of $1,360 million, or $2.88 per share, for the same quarter last year.
Evan G. Greenberg, Chairman and Chief Executive Officer of Chubb Limited, commented: "While it was a tough quarter for CATs, it's the business we're in. We experienced a series of significant natural catastrophes, including three hurricanes and two earthquakes, which will likely produce the third $100 billion-plus year for insured catastrophe losses globally for the industry in the last 12 years. We ran a 111% combined ratio and produced a loss of 13 cents per share, or essentially a quarter of our annual earnings, which is within our tolerance for risk and the amount of loss we would expect for these events. I'm proud of our claims and loss prevention organization's response serving our customers in their time of need. They continue to distinguish our company. The Chubb brand is all about service – we truly aim to serve our customers and go beyond their expectations.
"Our underlying operating results demonstrate the strength and vitality of the company. P&C net premiums written grew about 4.5% in the quarter. Excluding the catastrophe losses, both operating earnings and underwriting results were simply excellent. Our two sources of income were both records in the quarter – net investment income, up 7.5%, and P&C current accident year underwriting income excluding catastrophe losses, up about 5.5%, with a current accident year combined ratio excluding catastrophes of 88.5%. We also had record operating cash flow of $1.8 billion.
"I believe we are at the beginning of a firming price environment, driven by years of soft pricing that has resulted in inadequate rates in many classes. The magnitude of this year's CAT losses, which on a worldwide aggregate basis was between a one-in-five and one-in-10 year industry event, simply adds to the pressure to return to pricing that produces an adequate risk-adjusted return. In that regard, we intend as usual to demonstrate leadership.
"Our company is in great shape from the perspectives of risk management, growth opportunity and financial efficiency. We are investing aggressively in our future while delivering results to shareholders today, and we are optimistic about the future."
Operating loss was $(60) million, or $(0.13) per share, compared with operating income of $1,356 million, or $2.88 per share, for the same quarter last year. The property and casualty (P&C) combined ratio was 110.8% for the quarter driven by significant catastrophe losses. Book value per share increased 0.5% and tangible book value per share decreased (0.3)% from June 30, 2017 and now stand at $108.74 and $65.06, respectively. Book value and tangible book value were favorably impacted by net realized and unrealized gains of $162 million after-tax in the company's investment portfolio. Additionally, foreign currency movement favorably impacted book value by $675 million after-tax and tangible book value by $337 million after-tax.
For the three months ended September 30, 2017 and 2016, the tax expenses (benefits) were $(14) million and $(30) million, respectively, for Chubb one-time integration and merger-related expenses; $(18) million and $(26) million, respectively, for amortization of fair value adjustment of acquired invested assets and long-term debt; $8 million and $27 million, respectively, for adjusted net realized gains and losses; and $(61) million and $306 million, respectively, for operating income.
For the nine months ended September 30, 2017, net income was $2,328 million, or $4.94 per share, compared with $2,525 million, or $5.44 per share, for 2016. Operating income was $2,295 million, or $4.87 per share, compared with $3,433 million, or $7.40 per share, for 2016. The P&C combined ratio for the nine months ended September 30, 2017 was 96.0%. Book value per share increased 5.0% and tangible book value per share increased 7.3% from December 31, 2016. Book value and tangible book value were favorably impacted by net realized and unrealized gains of $835 million after-tax in the company's investment portfolio and $96 million of after-tax realized gains in the company's variable annuity reinsurance business. Additionally, foreign currency movement favorably impacted book value by $902 million after-tax and tangible book value by $459 million after-tax. Annualized ROE and operating ROE were 6.3% and 6.4%, respectively, for the year.
For the nine months ended September 30, 2017 and 2016, the tax expenses (benefits) were $(73) million and $(106) million, respectively, for Chubb one-time integration and merger-related expenses; $(62) million and $(79) million, respectively, for amortization of fair value adjustment of acquired invested assets and long-term debt; $25 million and $22 million, respectively, for adjusted net realized gains and losses; and $353 million and $719 million, respectively, for operating income.
- Merger-related underwriting actions adversely impacted P&C net premiums written growth by $87 million, or 1.3 percentage points. In addition, net premiums written growth was favorably impacted by $128 million, or 1.9 percentage points, from a one-time unearned premium reserve (UPR) transfer in 2016 which reduced net premiums written in the prior year. Excluding merger-related underwriting actions and the one-time UPR transfer, P&C net premiums written increased 4.0%.
- Net premiums earned increased 1.5%. Excluding merger-related underwriting actions, P&C net premiums earned were up 2.9% compared to prior year.
- The P&C current accident year combined ratio excluding catastrophe losses was 88.5%, compared to 88.9% in the prior year, which included an adverse impact of 0.5 percentage points from initial year purchase accounting adjustments related to the acquisition of The Chubb Corporation (Chubb Corp). Excluding the purchase accounting adjustments, the P&C current accident year combined ratio excluding catastrophe losses were virtually flat with the prior year.
- Total pre-tax and after-tax catastrophe losses for the quarter were $1,893 million (26.0 percentage points of the combined ratio) and $1,525 million, respectively, compared with $144 million (2.0 percentage points of the combined ratio) and $107 million, respectively, last year.
- Total pre-tax and after-tax favorable prior period development for the quarter were $270 million (3.7 percentage points of the combined ratio) and $206 million, respectively, compared with $349 million (4.9 percentage points of the combined ratio) and $252 million, respectively, last year. Favorable prior period development is net of a pre-tax environmental liability run-off charge in the company's Brandywine operations of $77 million in the current quarter and $52 million in the prior year. Additionally, the prior year included a reserve take-down of $25 million related to an individual legacy liability case.
- Adjusted net investment income, which excludes a purchase accounting adjustment of $80 million, was a record $893 million. Adjusted net investment income for the quarter included a $44 million final distribution related to a co-investment by Chubb with one of the company's private equity fund partners.
- Share repurchases totaled $232 million, or approximately 1.6 million shares, during the quarter. The company has repurchased approximately 5.0 million shares for $707 million through September 30, 2017.
- Net loss reserves increased $2,318 million in the quarter, primarily reflecting the significant catastrophe loss events in the period.
- North America Agricultural Insurance: Net premiums written increased 9.0%. The combined ratio was 90.4%, compared with 88.9%. The current accident year combined ratio excluding catastrophe losses was 90.3%, compared with 90.1%.
- Global Reinsurance: Net premiums written increased 47.1%, or 47.9% in constant dollars, primarily due to net reinstatement premiums collected of $37 million related to catastrophe loss events in the quarter as well as a new treaty written of $14 million. The combined ratio was 187.4%, compared with 66.3%. The current accident year combined ratio excluding catastrophe losses was 82.2%, compared with 78.1%.
- Life Insurance: Segment income was $64 million, compared with $69 million. International life insurance net premiums written and deposits collected increased 28.1% in constant dollars.
Please refer to the Chubb Limited Financial Supplement, dated September 30, 2017, which is posted on the company's investor relations website, investors.chubb.com, in the Financials section for more detailed information on individual segment performance, together with additional disclosure on reinsurance recoverable, loss reserves, investment portfolio, and debt and capital.
Chubb Limited will hold its third quarter earnings conference call on Friday, October 27, 2017, beginning at 8:30 a.m.Eastern. The earnings conference call will be available via live webcast at investors.chubb.com or by dialing 888-395-3241 (within the United States) or 719-325-2402 (international), passcode 7430195. Please refer to the Chubb investor relations website under Events and Presentations for details. A replay of the call will be available until Friday, November 10, 2017, and the archived webcast will be available for approximately one month. To listen to the replay, please click here to register and receive dial-in numbers.
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