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The Chubb Corporation Q1 2010 Earnings Call Transcript

The Chubb Corporation Q1 2010 Earnings Call Transcript

The Chubb Corporation (CB)

Q1 2010 Earnings Call

April 22, 2010 5:00 pm ET


John D. Finnegan – Chairman of the Board, President & Chief Executive Officer

John J. Degnan – Vice Chairman & Chief Operating Officer

Richard G. Spiro – Chief Financial Officer & Executive Vice President


Jay Gelb – Barclays Capital

Clifford Gallant – Keefe, Bruyette & Woods

Joshua Shanker – Deutsche Bank Securities

Paul Newsome – Sandler O’Neill & Partners LP

Michael Nannizzi – Oppenheimer & Co.

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Vinay Misquith – Credit Suisse

Matthew Heimermann – JP Morgan

Michael Grasher – Pipper Jaffray

Ian Gutterman – Adage Capital

Mark Dwelle – RBC Capital Markets

Keith Walsh – Citi



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Welcome to The Chubb Corporation first quarter 2010 earnings conference call. Today’s call is being recorded. Before we begin Chubb has asked me to make the following statements. In order to help you understand Chubb, its industry and its results, members of Chubb’s management team will include in today’s presentation forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

It is possible that actual results might differ from estimates and forecasts that Chubb’s management team might make today. Additional information regarding factors that could cause such differences appears in Chubb’s filings with the Securities & Exchange Commission. In the prepared remarks and responses to questions during today’s presentation of Chubb’s first quarter 2010 financial results, Chubb’s management may refer to financial measures that are not derived from generally accepted accounting principles or GAAP.

Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP and related information is provided in the press release in the financial supplement for the first quarter 2010 which are available on the investor’s section of Chubb’s website at


Please also note that no portion of this conference call may be reproduced or rebroadcast in any form without the prior written consent of Chubb. Replays of this webcast will be available through May 21, 2010. Those listening after April 22, 2010 should please note that the information and forecast provided in this recording will not necessarily be updated and it is possible that the information will no longer be current.

I will now turn the call over to Mr. Finnegan.

John D. Finnegan

As we noted in today’s press release, the big story for the property and casualty insurance industry in the first quarter was the extraordinary level of natural catastrophes worldwide. Although these catastrophes had a negative impact of $0.67 per share on Chubb’s first quarter results, we still produced operating income of $1.14 per share for the quarter, an excellent result. This reflected outstanding underwriting results with a combined ratio excluding catastrophes of 81.3%, nearly six percentage points better than a year ago. This was our best ex cat combined ratio since 2007 and it was driven by strong contribution from each of our business units.

Our investment portfolio also continued to perform well with net realized investment gains of $127 million pre-tax or $0.25 per share after tax. That brought our first quarter net income per share to $1.39. In addition, our portfolio’s unrealized appreciation before tax increased by about $170 million from year end 2009. These investments and underwriting results produced a GAAP book value per share of $48.17 at March 31, 2010. That’s a 2% increase since yearend 2009 and a 23% increase since March 31, 2009.

Our capital position is excellent. During the quarter we raised our common stock dividend for the 28


consecutive year and also have been actively buying back our stock. Now, John Degnan will discuss our operating performance.

John J. Degnan

Net written premiums for the first quarter increased 1%. This included a 4% positive impact of currency translation with a generally similar impact in each business unit. For Chubb personal insurance, net written premiums were up 4% and CPI produced a combined ratio of 104.4 compared to 90 last year. However, CPI had 22.8 points of cat in the first quarter this year compared to only 1.5 points in the first quarter of 2009.

On an ex cat basis, CPI’s first quarter combined ratio was 81.6 in 2010, nearly seven points better than a year ago when it was 88.5. Homeowner’s premiums were up a point with a combined ratio of 113.3 including 35.1 points of cats. On an ex cat basis the combined ratio for homeowners in the first quarter was 78.2 in 2010, a substantial improvement over a year ago when it was 85.8. Personal auto premiums increased 11% driven by growth outside the US. The combined ratio was 91.5. In other personal lines, premiums were up 7% and the combined ratio was 87.5.

At Chubb commercial insurance, premiums for the quarter were down 1%. Premiums for multiple peril and for workers’ comp were down 6% but casualty premiums increased 1% and property and marine was up 2%. CCI’s combined ratio for the quarter was 93.8 compared to 90.2 a year earlier. Excluding the 11.4 point impact of cats, CCI’s first quarter combined ratio this year was 82.4, nearly seven points better than last year’s 89.2. CCI’s renewal retention rate in the US was 84% for the quarter with an average renewal rate increase of 1%, further evidence of our success in retaining business at profitable rates at a competitive marketplace. The ratio of new to lost business in the US was one-to-one.

At Chubb specialty insurance, net written premiums were up 3% for the first quarter and the combined ratio was 80.9, more than four points better than the 85.1 we recorded in the first quarter of 2009. Professional liability premiums grew 3% in the first quarter and the combined ratio was 86.2 compared to 91.3 in the first quarter of 2009. In the US, first quarter retention and renewal was 85% and average renewal rates were down 1%. The ratio of new to lost business was one-to-one.

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