NU Online News Service, July 27, 12:23 p.m. EDT
Chubb Corp.’s chief executive says the insurer is getting rid of some underperforming professional liability accounts.
“We’re culling the business [where] we don’t see the market allowing us to take enough rate in the near future to make adequate profit,” says John D. Finnegan, president, chairman and CEO of Chubb, during the company’s second-quarter earnings conference call yesterday.
The Warren, N.J.-based company is also seeking rate increases, as much as 35 percent, on its least-profitable lines of professional liability business, which has resulted in a drop in retention—but only among the poorest-performing accounts.
Retention among what Chubb refers to as a “one-star” account has gone from the mid-80s to the mid-60s over the last year, Finnegan adds.
“We lost a lot of retention, but that’s OK,” he says.
During the call, Paul J. Krump, president of commercial and specialty lines, says of professional liability: “Current market conditions being what they are, this is not the time to be aggressively growing the book.”
Nevertheless, he says Chubb is encouraged by average renewal rate increases in the second quarter of 7 percent in professional liability—led by private- and public-company directors’ and officers’ liability, which saw increases in the low double-digits.
The 7 percent average rate increase at renewal is the strongest quarterly renewal rate since 2003, Krump adds.
Net written premiums in Chubb Specialty Insurance declined 6 percent in the second quarter, compared to the same period a year ago.
Elsewhere within Chubb, net written premiums were up 3 percent in Chubb Commercial Insurance and 4 percent in Chubb Personal Insurance.
The insurer received an average rate increase of 9 percent at renewal in commercial lines, driven by mid-teen increases in mono-line property, says Krump, adding that the spread between rates on renewals and new business is “very small.”
This has led to lower levels of new business over the last year. New business makes up 12 percent of Chubb’s standard and specialty commercial book. That’s a new low for both groups, says Krump.
“The bottom line is that we realized that new business rarely performs as well as our season renewals,” he says.
Chubb reported second-quarter net income was down slightly to $404 million from $419 million last year during the same time.
Second-quarter catastrophe losses, attributable almost exclusively to wind and hail storms, were $223 million, pre-tax. The total is much higher than the first quarter, but lower than the $329 million in catastrophe losses booked during the 2011 second quarter.
For the first six months of this year, net income was $910 million compared to $928 million for the first half of 2011. The impact of catastrophes during that period was $247 million pre-tax, much less than the $599 million pre-tax in 2011.