Chubb (CB) Q1 Earnings Beat Estimates, Down Y/Y on Cat Loss

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Chubb LimitedCB reported first-quarter 2018 core operating income of $2.34 per share, which surpassed the Zacks Consensus Estimate of $2.31 by 4.46%. However, the bottom line declined 5.6% from the prior-year quarter on higher catastrophe losses.

Chubb Limited Price, Consensus and EPS Surprise

Chubb Limited Price, Consensus and EPS Surprise | Chubb Limited Quote

Though the company registered better-than-expected earnings, it suffered due to catastrophe loss excluding which, core operating income per share increased 5.3%.

Nonetheless, net investment income was solid while premium revenue and commercial P&C pricing improved across many of its businesses lines.

Including one-time integration and merger-related expenses of 2 cents, amortization of fair value adjustment of acquired invested assets, a long-term debt of 11 cents and a net realized loss of 9 cents, net income of $2.30 per share dipped 0.4% from the year-ago quarter.

Quarter in Detail

Net premiums written improved 5.9% year over year to about $7.1 billion in the quarter under review. Net premiums earned increased 3.8% to $7 billion.

Adjusted net investment income was $877 million, up 4.9% from the prior year.

Property and casualty underwriting income was $642 million, declining 18.1% from the year-ago quarter. This downside is attributable to the $303 million cat loss incurred in the reported quarter. Chubb reported catastrophe losses of 64 cents in the reported quarter, compared with 34 cent in the year ago quarter. Combined ratio deteriorated 260 basis points (bps) to 90.1%.

Merger-related expenses were $48 million in the first quarter. The company projects $150 million of merger-related expenses for 2018.

Segment Update

North America Commercial P&C Insurance : Net premiums written increased 3% year over year to $2.8 billion, benefiting from higher premiums in the middle-market division and a small commercial division. Combined ratio deteriorated 140 bps to 86.2%.

North America Personal P&C Insurance : Net premiums written increased 6.5% year over year to $1 billion. Combined ratio deteriorated 2000 bps to 104.2%.

Overseas General Insurance : Net premiums written rose 7.8% year over year to $2.4 billion. Combined ratio improved 490 bps to 90.7%.

North America Agricultural Insurance : Net premiums written soared 77% year over year to $108 million on higher crop premiums. Combined ratio improved 690 bps to 101.6%.

Global Reinsurance : Net premiums written decreased 3% year over year to $193 million. Combined ratio of 69.5% improved 1260 bps from the year-earlier quarter.

Life Insurance : Net premiums written improved 12.5% year over year to $938 million.

Financial Update

Cash balance was $1.99 billion as of Mar 31 2018, surged from $728 million from the end of 2017. Total shareholders' equity nudged up 0.2% to $51.3 million as of Mar 31, 2018.

Book value per share was $110.10 as of Mar 31, 2018, down 0.2% from year-end 2017. This fall was attributable to realized and unrealized loss of $938 million in the company's investment portfolio, driven by rising interest rates. However, a favorable foreign currency movement limited this downside,

Core operating ROE was 8.7% in the quarter while operating cash flow was $551 million.

Zacks Rank

Chubb carries a Zacks Rank # 4 (Sell).

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Performance of Other Insurers

The bottom line of Torchmark Corporation TMK , The Progressive Corporation PGR and RLI Corp. RLI surpassed the respective Zacks Consensus Estimate in the first quarter of 2018.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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