The Chubb Corp. reported today that second quarter net income rose 20 percent to $598 million compared to $495 million in the second quarter of 2005.
The second quarter combined loss and expense ratio improved to 85.2 in 2006 from 88 in 2005.
"Each of our three major business units contributed substantially to earnings, and the specialty business reached a milestone in its recovery by achieving a combined ratio below 90," said John D. Finnegan, chairman, president and chief executive officer.
Second quarter net written premiums for the insurance business increased 3 percent to $3 billion. Premiums for the reinsurance assumed business declined 51 percent, reflecting the impact of the Chubb Re Harbor Point transaction completed in December 2005. Total net written premiums declined 1 percent to $3.1 billion.
Morgan Stanley property-casualty analyst William Wilt said the main dark lining from the reports was that the carrier has started receiving claims stemming from the Justice Department and Securities and Exchange Commission investigation into alleged back-dating of stock options.
Earlier this month, a New York-based credit research firm, CreditSights Inc., warned the company's heavy exposure from its directors and officers liability line could place it in jeopardy if the investigation widens.
Chief Administrative Officer John Degnan downplayed the significance of those claims during the analyst conference call yesterday.
"We believe the early hype may be overblown and is reminiscent of early speculation about mutual fund claims," he said.
Mr. Degnan added that the company has written only excess layers, unlike the multiple layers the company wrote on policies that proved expensive from the corporate scandals for 2001-02.
And for many policies, the carrier will not be responsible for legal defenses.
Bear Stearns analyst David Small noted that this was the 10th consecutive quarter that the Warren, N.J.-based carrier beat analysts' consensus on earnings.
He said the fact that loss costs have not increased as expected diluted the bottom line impact of the flat-to-down renewal pricing in both commercial and specialty lines. "Chubb continues to benefit from the repositioning of its book that began several years ago," he wrote.
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