Chubb Profit Up 28% Despite Asbestos Charge

By Michael Ha

NU Online News Service, Feb. 4, 1:12 p.m.EST?The Chubb Corporation's 2003 fourth-quarter netearnings rose 28 percent, to $72.3 million from $56.6 millionreported during the 2002 fourth quarter, despite taking heftycharges including $250 million pretax to boost asbestos andenvironmental reserves.[@@]

Besides the $250 million charge, Chubb also registered a loss of$96 million pretax from its non-insurance unit, Chubb FinancialSolutions.

The Warren, N.J.-based company is one of the largestdirectors-and-officers liability insurers and is a major insurer ofhigh-value homes and valuables. Commenting on its new asbestoscharge, the Chubb explained that it has just completed a rigorousupdate of its 2002 ground-up asbestos reserve analysis.

The company said its increase in reserves was warranted based ondevelopments related to its clients and on overall industryexperience. The $250 million reserve increase reflects "the bestestimate of Chubb's actuaries" and uses the latest informationavailable, the insurer said.

"Based upon this detailed update," said Chubb Chief ExecutiveJohn Finnegan, "we have as high a level of confidence in theadequacy of our asbestos reserves as is possible in this dynamicand challenging environment." As of year-end 2003, Chubb's totalreserves for asbestos stood at just over $1 billion, the companynoted.

For the full-year 2003, Chubb's net income came in at $808.8million, compared with net profit of $222.9 million reported in2002, when the company took a $741 million pretax charge forasbestos and environmental loss reserves.

Chubb pointed out that despite its latest reserve addition, itsproperty-casualty business remains fundamentally strong.

"Chubb has made significant progress in 2003, with solid premiumgrowth, a significant improvement in loss ratio and a lower expenseratio," said Mr. Finnegan. "During the year, we raised new capital,grew the business while maintaining underwriting discipline,restored profitability to our European operations and infused theChubb culture with a mindset of expense control."

For the 2003 fourth quarter, Chubb's overall p-c net premiumswritten grew 21 percent to $2.9 billion. In the company's U.S.operations, premiums rose 20 percent, while non-U.S. premiums alsoimproved, growing 24 percent.

Despite an underwriting loss of $137.5 million for the quarter,larger than the $61.1 million loss reported one year ago, thecompany had underwriting profit of $104.5 million for the fullyear, reversing a loss of $625.9 million for the full-year2002.

Looking into various segments, Chubb's commercial-insurance netwritten premiums rose 19 percent to $1.05 billion for the fourthquarter, with a combined ratio of 113.2 percent including theasbestos charge.

Chubb's specialty-insurance premiums grew 28 percent to $1.24billion for the quarter, with a combined ratio of 100.6 percent.The company's executive-protection net written premiums also rose,up 20 percent in the fourth quarter, with a combined ratio of 103.8percent, and the financial-institutions net premiums rose 32percent in the quarter, with a combined ratio of 109.7 percent.

On the personal-insurance side, Chubb's premiums grew 11 percentto $641 million for the fourth quarter, with a combined ratio of96.0 percent. The homeowners' line grew 13 percent, while personalauto insurance rose 9 percent with a combined ratio of 98.9percent, and other personal lines--including valuable articles,excess liability and yacht insurance--grew 8 percent, with a ratioof 85.9 percent.

The investment income for Chubb's property and casualtybusiness, which made up the bulk of the net profit, also improved,up 15.4 percent to $224 million from $194.1 million reported in2002 fourth quarter.