Chubb reaps benefit from ACE merger with strong 2016 results

01-02-2017

Chubb has seen its profits rise rapidly in both the fourth quarter of 2016 and for the full year, in the wake of the ACE-Chubb merger as Evan Greenberg, the company’s CEO, said the company had "achieved or exceeded substantially all of the financial and non-financial targets we set at the time of the merger".

ACE received the regulatory approvals needed to close its acquisition of Chubb in January 2016.

The company made a net profit of $4.1 billion for the whole of 2016, a 45.9 percent increase on 2015; for the fourth quarter alone, its profits increased by 135.7 percent to reach $1.6 billion.

Its gross written premiums reached $34.9 billion last year compared with $23 billion in 2015; for the fourth quarter alone, they increased to $8.8 billion compared with $5.6 billion the year before. GWP in its reinsurance unit shrank to $739 million for the full year compared with $883 million in 2015.

The company’s combined ratio in its property-casualty business was 88.7 percent for the full year compared with 87.4 percent the year before, the P&C division delivering underwriting income of $3 billion in 2016 compared with $1.9 billion in 2015.

Evan Greenberg, chairman and chief executive Officer of Chubb, said: "Chubb had a very good quarter that contributed to a year of great accomplishment in both financial and non-financial results. After-tax operating income per share for the quarter was up over 14 percent while full-year earnings of $10.12 per share were up more than 3.5 percent and a record.

"Even with elevated natural catastrophe losses and soft P&C market conditions globally, our underwriting results in the quarter were simply excellent, highlighted by a P&C combined ratio of 87.6 percent and driven by strong performances from our global P&C businesses and our agriculture division, which had an outstanding quarter. For the year, our company's P&C combined ratio was 88 percent compared to 87.5 percent prior year as if we were one company then – simply world-class.

"Our strong earnings led to very good operating ROEs of 11 percent for the quarter and 10.5 percent for the year. Book and tangible book value growth was relatively flat in the quarter, an excellent result considering the sharp rise in interest rates at year-end and a strengthening dollar. For the year, per share book value increased 15.5% while per share tangible book value decreased 16 percent, both influenced by the merger. If measured from the merger closing in mid-January to year-end, book and tangible book value per share increased 7.5 percent and over 13 percent, respectively.

"For the quarter, premium revenue growth was a bit better than what we experienced in prior quarters during the year with many of the same themes – strong retentions of our in force business, less new business due to market conditions, and a revenue penalty due to planned merger-related underwriting actions including the purchase of additional reinsurance. While market conditions globally are competitive, I expect as we progress through '17, and the impact of the merger continues to fade and the power of the organization gains more momentum, we will produce stronger growth.

"Operationally and culturally, our integration efforts are on track and we have either achieved or exceeded substantially all of the financial and non-financial targets we set at the time of the merger.

"We are operating in a time of uncertainty, economically and geopolitically. On the one hand, the world is a tense place, marked by growing nationalism and populism that are feeding protectionist sentiment. On the other hand, in the US, the monetary and fiscal changes afoot around tax, regulation of business, infrastructure and higher interest rates are potentially a real positive for business, jobs and the economy if implemented in a way that does not exacerbate budget deficits.

"Despite the challenging environment, Chubb is a company built to outperform and I am optimistic about our future, both 2017 and beyond."

Chubb, Results, ACE, Evan Greenberg, US, North America, Bermuda

Bermuda Re