Data and Functionality Signaled Chubb’s Strong 4Q Underwriting Income

Chubb reported 4Q EPS earlier this week that handedly beat expectations (EPS $7.52 vs. FS $6.77) by delivering record investment performance and solid underwriting performance. EPS was fueled by a combined ratio that dropped to 81.2% vs. FS 84.4% and resulted in record underwriting performance.

Using FactSet data and functionality, our January 9 article Inflationary Pressure Drops and Other Positive Signals for Homeowners Insurance highlighted a combination of favorable macro trends and product mix to conclude that Chubb’s main business lines and its combined ratio were well positioned to benefit from the prior quarter’s environment.

Macro Trends

We have highlighted two macro trends in our notes throughout the prior quarter that supported Chubb’s recent results:

• Strong equity markets (red box on the FactSet Macro Tracker below / S&P 500) were identified as a tailwind that could fuel investment income

• Low inflation (two blue boxes on the FactSet Macro Tracker below / CPI and PPI) supports underwriting income by providing a predictable, stable environment to better price future business and control claim costs.

Linking Macro Trends to Potential EPS Impact

Our Macro Tracker table lists key economic data relevant to insurance company earnings. The right-hand column ties macro trends to the potential impact on company earnings.

Deep Sector data and functionality shown in this report are available through the FactSet Workstation.

Basic Underwriting Income Data and Analysis

The FactSet Workstation pulls publicly available earnings-related data into one folder (red box at the bottom of the left-hand panel (labeled Earnings). The folder shown contains Chubb’s earnings-related documents released earlier this week. The red box to the right shows that FY data have been selected. Documents for prior periods can be surfaced by shifting the selection to the appropriate year and quarter. This report will focus on the Workstation data and functionality rather than the publicly available data.

Workstation source: Company/Security - Earnings - FactSet

Shifting to the workstation data and functionality to analyze Chubb’s 4Q results, a user would likely analyze the business lines that produced Chubb’s underwriting income. A starting point could be the State/Line – Exhibit of Premiums / Losses, shown below for Chubb INA Group, which is the group that holds Chubb Limited subsidiaries such as ACE American Insurance Co.

The exhibit shows for the period ended that Homeowners Multiple Peril, in the red box, was not only one of Chubb INA Group’s larger businesses, but it was profitable for the period as well. The favorable macro landscape and pricing environment for homeowners insurance during the most recently reported quarter, one of Chubb’s larger businesses, help explain its favorable 4Q underwriting results.

Workstation source: Web Workstation - FactSet

Basic Investment Income Data and Analysis

The summary investment schedule for Chubb INA Group provides a basic attribution of the portfolio by asset class. In the case of Chubb INA Group, the schedule shows the investment portfolio is split with over 95% invested in bonds and under 2% invested in common stocks. Compared to most P&C companies, this mix is more heavily weighted towards bonds and less weighted towards common stocks.  

The Summary Investment schedule provides a good starting point to begin analysis of investment income. One other point should be mentioned about the Summary Investment Schedule. Another percentage of asset class shown in the Summary Investment Schedule, other than bonds and common stock, stands out: Other Invested Assets, which is highlighted by the green box in the exhibit below.  

The Other Invested Assets details are reported in a separate Schedule BA that includes investments such as joint ventures and partnerships. Further analysis would include a review of Schedule BA investments given the combination of a conservative bond position, minimal exposure to common stock, and the strong investment income results.

Workstation source: Web Workstation - FactSet 

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