Chubb Posts Profit Gain, Raises Full-Year Forecast (Update2)

By Jamie McGee
Bloomberg News
July 23, 2009

July 23 (Bloomberg) -- Chubb Corp., the insurer of corporate boards and high-end homes, raised its forecast for the year and said it would accelerate share buybacks after posting its first profit increase in seven quarters. The company gained in extended trading.

Second-quarter net income rose 17 percent to $551 million, or $1.54 a share, from $469 million, or $1.27, in the year- earlier period, the Warren, New Jersey-based insurer said today in a statement. Operating income, which excludes some investment results, was $1.49 a share, beating the $1.29 estimate of 19 analysts surveyed by Bloomberg. Results were helped by investment gains and lower catastrophe costs.

The insurer sidestepped losses from subprime home loans, which have hobbled its competitors, by investing in municipal bonds, Treasuries and mortgage securities issued by government- backed companies. Chubb increased its dividend this year and has remained profitable during the recession while most of its largest competitors have cut their quarterly payouts or reported quarterly losses.

Chubb "is one of the most financially secure of all the property-casualty insurers, with a very solid investment portfolio," UBS AG analyst Brian Meredith said in an interview before the earnings were released. "It's in a good position."

Higher Forecast

Chubb said full year operating earnings would be $5.20 to $5.50 a share, compared with a projection of $4.80 to $5.20 in January.

The insurer gained 2.5 percent to $43.69 at 4:57 p.m. New York time in extended trading. Chubb fell about 12 percent on the New York Stock Exchange in the past 12 months, beating the 19 percent decline in the 26-stock Standard & Poor's Supercomposite Property & Casualty Insurance Index.

Chubb repurchased 2.3 million common stock shares in the second quarter for $90 million, according to the statement, and plans to buy back the remaining 15.7 million shares authorized by the board by Dec. 31. The company announced late last year it had authorized the repurchase of as many as 20 million shares and that the buyback program had no expiration date.

Earnings were aided by an $18 million gain in the value of its holdings compared with a $49 million investment loss in the year earlier period. Chubb's book value, a measure of assets minus liabilities, climbed 5.7 percent to $41.45 per share from $39.20 in the first quarter.

Catastrophes cost the insurer 8 cents a share compared with 28 cents in the year-earlier period when a higher-than-average frequency of tornadoes contributed to a record first half for twisters in the U.S.

Tornadoes, Hail

Severe weather frequency in the U.S. fell by at least 39 percent in the second quarter from last year, according to preliminary data issued by the National Weather Service on its Web site. There were about 12,355 severe incidents including hail, wind and tornadoes in the quarter, compared with 20,297 in the same period last year. The tally may drop further when the service investigates storm data and compiles official statistics.

The insurer announced Chief Operating Officer John Degnan will stay on until Dec. 31, 2010 after the board extended the date of his mandatory retirement by one year.

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