Chubb beats Q2 estimates on record investment income, stronger underwriting

Chubb reported Q2 core operating earnings of $7.26 a share, beating the $6.63 consensus by 9.5%, as underwriting profit climbed and investment income hit a record.

"The quarter benefited from strong P&C underwriting and broad-based premium growth across our international operations," management said in the earnings release.

Underwriting income rose 18.8% to $1.94 billion. The combined ratio — the share of premiums consumed by claims and expenses — improved 180 basis points to 83.8%, meaning Chubb kept more than 16 cents of every premium dollar as underwriting profit. Excluding catastrophe losses, the current accident year combined ratio was 82.2%. Pre-tax net catastrophe losses fell to $475 million from $630 million a year earlier, while favorable prior-period reserve development increased to $283 million from $249 million.

Revenue of $15.77 billion rose 2.7% from a year earlier but missed the $15.90 billion consensus by 0.8%. Net premiums written increased 3.6% to $14.71 billion, though that fell short of the $15 billion analysts expected. The shortfall was concentrated in North America commercial lines, where net premiums written declined 2.3% to $5.59 billion as underwriting actions weighed on large-account and excess and surplus property business. Middle-market and small commercial premiums rose 8.9% to $2.34 billion, while North America personal lines grew 6% to $2.05 billion.

Overseas general insurance net premiums written jumped 10.2% to $3.99 billion, or 4.8% in constant currency, with Latin America up 15.6% and Asia up 12%. Life insurance net premiums written rose 7.5% to $1.94 billion.

Record investment income provided a second engine. Pre-tax net investment income rose 12.3% to $1.76 billion, supported by fixed-income and alternative asset portfolios. Life insurance segment income increased 9% to $332 million.

Chubb returned $1.37 billion to shareholders in the quarter, including $979 million in buybacks at an average price of $327.18 a share and $395 million in dividends. Book value per share rose 12.3% to $195.45, and tangible book value per share increased 17.1% to $131.93. Annualized core operating return on tangible equity was 21.2%.

The beat shows that Chubb's disciplined underwriting is holding up even as pricing pressure spreads to parts of casualty and financial lines. Investors will watch the third quarter for signs of whether the property market softens further and how catastrophe losses trend through peak hurricane season.

This article is for informational purposes only and does not constitute investment advice.