Travelers is helped by a one-time sale and low catastrophe losses. Chubb suffers from higher catastrophe losses.
By CYRIL TUOHY, managing editor of Risk & Insurance?
Third-quarter net earnings were mixed for two of the nation's largest commercial-lines carriers as a flat pricing environment made it difficult for carriers to make money on underwriting.
Travelers, based in Hartford, Conn., reported net income of $1.0 billion, up 7 percent from $935 million in the year-ago period, the company said. After-tax operating income of $858 million was down by $56 million compared with the year-ago period due to a $36 million decrease in underwriting gains and a $19 million drop in net investment income, the company also reported.The combined ratio of 90.6 percent, however, was slightly higher than the 89.7 percent reported in the year-ago period. Lower catastrophe losses from hail and windstorms also helped, the company said.
In the earnings statement, Chairman and CEO Jay Fishman said that, despite the drop in underwriting, "results remained strong across each of our business segments," pointing to the combined ratio.
Travelers also reported revenues of $6.48 billion, up 2 percent from the year-ago period, helped by the one-time after-tax gain of $133 million from the sale of shares of Verisk Analytics Inc. Net written premiums of $5.46 billion were also up 2 percent from the year-ago period, the company reported.
A soft market, low reinvestment yields, soft prices and fewer exposure units continue to challenge the company, Fishman also said. Despite the soft market, client retention is strong, underwriters are only covering risks when they can get an adequate price, and the claims environment remains "benign," he added.
CATS TAKE A BITE OUT OF PROFITS
Warren, N.J.-based insurance giant Chubb Corp. reported third-quarter net income of $572 million, down from $596 million in the year-ago period as pretax catastrophe losses surged to $58 million, up $36 million from the year-ago period, the company reported.
The combined ratio was 86.2 percent, up slightly from 85.4 percent in the year-ago period, as the impact of catastrophes--a big earthquake in Chile and storms in the U.S. Northeast--added 2.1 percentage points to the combined ratio.
Excluding catastrophes, the combined ratio for the third quarter improved slightly to 84.1 percent, down from 84.6 percent. The lower the combined ratio, the more profitable the insurance carrier.
Operating income was $537 million, down from $552 million in the year-ago period, and net written premium was up just 1 percent to $2.7 billion, the company also reported.
John D. Finnegan, chairman, president and CEO, said in a statement that the company would continue to maintain its "discipline in risk selection and pricing." The company increased its 2010 full-year operating income per-share guidance.
Chubb Commercial Insurance (CCI) net written premiums in the third quarter were flat at $1.1 billion, and average renewal rates in the United States were down 1 percent, the company reported. CCI retained 87 percent of the U.S. premiums that came up for renewal.
STILL IN GREAT SHAPE
Yet despite its CAT hit, Chubb is ahead of the pack of property/casualty carriers.
"Compared with the rest of the industry, they are in excellent shape and are well capitalized," said Brian O'Larte, senior financial analyst with A.M. Best & Co.
Chubb's professional client base and the company's high-net-worth client base in the personal-lines segment tend to be more sensitive to good service than to shopping around for the best price, O'Larte said.
Third-quarter net written premiums for Chubb's specialty-lines business were flat at $669 million, the company reported, and professional liability net written premiums declined 1 percent. Average third-quarter renewal rates for professional liability in the United States were down 2 percent, the company also said.
Net written premiums in the company's surety business increased 7 percent.
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