Chubb Ltd’s net profit more than halved in the third quarter, reflecting Hurricane Ian’s claims and realized losses, and the insurer’s top executive said on Wednesday that further commercial rate increases are necessary to keep pace with loss costs and inflation.
“Loss rates in most classes will need to rise at a faster rate or the industry will fail to keep pace,” given loss cost inflation and what will slow growth and exposure in the future, said Chubb Chairman and CEO Evan G. Greenberg during an earnings call with analysts.
Chubb reported third-quarter net income of $812 million, down 55.7% from $1.83 billion in the prior-year period, according to an earnings statement released after Tuesday̵7;s market close.
Net income for the quarter was negatively impacted by realized losses of $502 million after tax, “primarily due to the mark-to-market effect on derivatives and private equities as well as from the sale of fixed income,” Chubb said in the statement.
Pretax catastrophe losses, net of reinsurance and including reinsurance premiums, were $1.16 billion in the quarter, including $975 million from Hurricane Ian. About 77% of Chubb’s Ian-related loss was incurred in commercial lines.
Chubb’s total expense ratio improved to 93.1% during the quarter, compared to 93.4% last year.
Catastrophe pricing is inadequate in many portfolios, and property pricing will continue to adjust to the realities of the natural cat environment and to the increased costs of reinsurance and lack of availability, Greenberg said.
Chubb is fully prepared to take on catastrophe risk and the associated volatility, as long as it is adequately compensated, he said.
Total net premiums increased 14.4% from the third quarter of 2021 to $12.0 billion.
Chubb’s property/casualty net premiums increased 8.5% to $10.747 billion. North America property/casualty net premiums increased 10.6% to $7.837 billion, with commercial lines growing 11.4%.
In North America, growth in commercial lines was led by Chubb’s large customer and specialty division, which grew 9.7%, Greenberg said. Its medium and small commercial business grew by 5.7%.
Total rates in North America commercial lines rose 5%, excluding workers compensation, while total pricing including rates and exposure increased 8.5%, he said.
“We stay on top of inflation in terms of pricing and reservations,” he said.
On larger accounts, rates increased by 5.3%, with an overall rate increase of 8.6%. General accident rates rose 8.7%, property prices rose 9.7% and financial lines rose 4.3%, he said. In its surplus and surplus, wholesale prices rose 9%, with overall pricing up almost 13%.
Net investment income before tax was a record $979 million, up from $866 million in the prior year. “With interest rates rising and spreads widening, investment income is and will continue to rise,” Greenberg said.
Chubb completed its $5.4 billion acquisition of Cigna Corp’s Asian operations in the third quarter, more than doubling its life insurance premiums.
It expects to announce regulatory approval of its additional stake in Chinese insurer Huatai Insurance Group Co. Ltd., said Mr. Greenberg.